An Inventory Acquisition Is Received Late in the Afternoon of December

question 67

Multiple Choice

An inventory acquisition is received late in the afternoon of December 31 after the physical inventory is completed. If the acquisition is included in accounts payable and purchases, but excluded from inventory, the result:

• A) is an overstatement of net earnings.
• B) does not affect earnings.
• C) is indeterminable from the information given.
• D) is an understatement of net earnings.

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Definitions:

Short-Run Profits

Earnings that a company makes over a short period of time, not taking into consideration the full costs of production in the long term.

Profit-Maximizing

A strategy or process by which a business aims to achieve the highest possible profits from its operations.

Market Price

The contemporary pricing at which a commodity or service is offered for exchange in the open market.

Economic Profits

The surplus remaining after deducting both explicit and implicit costs from total revenues, often indicating the profitability beyond normal returns.