The Accountant for Sue Company Made the Following Errors Related $2010 \mathrm{was}$

question 50

Multiple Choice

The accountant for Sue Company made the following errors related to inventory in 2010: 1. The beginning inventory for $2010 \mathrm{was}$ overstated by $\$ 375$ due to an error in the physical count.
2. A $\$ 650$ purchase of merchandise on credit in 2010 was not recorded or included in the ending inventony.
Assuming a periodic inventory system, how would Sue's cost of goods sold, gross profit, and net income be affected in 2010 by these errors?
$\begin{array}{lll}&\text { Cost of Goods Sold }&\text { Gross Profit }&\text { Net Income }\\\hlineI.&\text { Overstated } & \text { Understated } & \text { Understated } \\II.&\text { Overstated } & \text { Understated } & \text { No effect } \\III.&\text { Understated } & \text { Overstated } & \text { Overstated } \\IV.&\text { No effect } & \text { No effect } & \text { No effect }\end{array}$

• A)I
• B)II
• C)III
• D)IV

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Definitions:

Emergency Room

A specialized department in a hospital that provides immediate treatment to patients with acute illnesses or injuries.

Intensive Care

Specialized medical and nursing care for patients with severe illnesses or injuries, typically provided in an intensive care unit (ICU).

Step-Down Method

An allocation technique used in cost accounting to distribute overhead costs among various cost centers or departments with multiple service departments.

Operating Department Y

A specific division within an organization that is focused on core operational tasks related to producing goods or services.