An Error in the Ending Inventory One Period Causes an Offsetting

question 20

Multiple Choice

An error in the ending inventory one period causes an offsetting error in the next period,and as a result:

• A)it affects only income statement accounts.
• B)it affects only balance sheet accounts.
• C)management can ignore the error.
• D)it is a self-correcting or counter-balancing error.

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Definitions:

Annual Overhead

The total recurring business expenses not directly tied to the production of goods or services, calculated on a yearly basis.

Manufacturing Overhead-Applied

The allocation of estimated manufacturing overhead costs to individual products or job orders based on a predetermined rate.

Direct Labor Hours

The sum of hours spent by workers directly partaking in the creation of goods or provision of services.