A $25,000 Overstatement of the 2014 Ending Inventory Was Discovered

question 115

Multiple Choice

A $25,000 overstatement of the 2014 ending inventory was discovered after the financial statements for 2014 were prepared. Which of the following describes the effect of the inventory error on the 2014 financial statements?

• A) Current assets were overstated and net income was understated.
• B) Current assets were understated and net income was understated.
• C)Current assets were overstated and net income was overstated.
• D)Current assets were understated and net income was overstateD.An overstatement of ending inventory overstates current assets and understates cost of goods sold and therefore overstates net income.

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Definitions:

Objective And Task Method

A budgeting approach where a company sets a budget based on the costs of the tasks necessary to achieve specific marketing objectives.

Competitive Parity Method

A marketing budgeting strategy where a company's spend is in line with its competitors to prevent market share loss.

Social Personality

Represents an individual's or brand's persona as projected or perceived on social media platforms.

Social Persona

An online identity a person adopts in social networks and digital platforms, which may differ from their real-life personality.