Exhibit 23-6 Nora Company Has a Fiscal Year Ending on December

question 43

Multiple Choice

Exhibit 23-6 Nora Company has a fiscal year ending on December 31.Its financial statements for the years ended December 31, 2010 and 2011, contained the following errors:
$\begin{array}{lrr}&2010&2011\\\text { Ending inventory } & \$ 9,000 \text { understated } & \$ 15,000 \text { overstated } \\\text { Bad debt expense } & 2,000 \text { overstated } & 1,000 \text { understated }\end{array}$

- Assume no correcting entries have been made.
Refer to Exhibit 23-6.By how much was Nora's 2011 net income overstated or understated?

• A)$23, 000 understated
• B)$14, 000 overstated
• C)$ 7, 000 understated
• D)$25, 000 overstated

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Definitions:

Price Floor

A price floor is a government-imposed minimum price charged for a product, aimed at preventing prices from dropping too low.

Binding Price Floors

Government-imposed price minimums that are set above the equilibrium price, causing surpluses in the market.

Binding Price Ceilings

Government-imposed price limits that are set below the market equilibrium price, leading to shortages.

Market Efficiency

A condition in which market prices fully reflect all available information and assets are priced accordingly.