What Is the Effect on Net Income for the Current

question 93

Multiple Choice

What is the effect on net income for the current year if a company fails to record a purchase of materials in transit (FOB shipping point) but includes the materials in physical inventory at year-end?

• A)Net income is overstated.
• B)Net income is understated.
• C)Net income is unaffected.
• D)Not enough information is provided to determine the answer.

---

Definitions:

TMC Wheel End Adjustment

A procedure or set of guidelines issued by the Technology & Maintenance Council for adjusting the wheel end of a vehicle to ensure proper alignment and performance.

Preload Drag

A condition characterized by friction and drag in machinery components, typically bearings, caused by an applied preload force to ensure clearance elimination and precise operation.

Endplay

Linear play in a shaft, wheel, or rotor. The slang term for this, slop, describes the condition well. Some OEMs use the term axial slop to describe endplay.

Truck Wheel Seal

A component used in trucks to prevent lubricants from leaking out of the wheel bearings and to keep contaminants out.