What Is the Effect on Net Income If a Company

question 92

Multiple Choice

What is the effect on net income if a company fails to record a purchase in transit (FOB shipping point) and also fails to include the purchase in physical inventory?

• A)Income is overstated.
• B)Income is understated.
• C)Income is correct.
• D)Not enough information is provided to determine the answer.

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Definitions:

GDP Deflator

An index that measures the prices of all new, domestically manufactured, final goods and services in a country's economy.

Ghent Altarpiece

A highly detailed polyptych altarpiece by Hubert and Jan van Eyck, renowned for its sophisticated technique and symbolism.

Hubert

Likely a reference to Hubert van Eyck, an Early Netherlandish painter and older brother of Jan van Eyck, thought to be a master of oil painting technique and detailed landscapes.

Jan Van Eyck

A Flemish painter active in the 15th century, known for his detailed portraiture and use of oil paint, contributing significantly to the Northern Renaissance.