At the End of 20A, a $2,500 Understatement Was Discovered

question 51

Multiple Choice

At the end of 20A, a $2,500 understatement was discovered in the amount of the 20A ending inventory as reflected in the perpetual inventory records. What were the 20A effects of the $2,500 inventory error (before correction) ?

• A) Cost of goods sold was understated by $2,500 and pretax profit was understated by $2,500.
• B) Cost of goods sold was overstated by $2,500 and pretax profit was overstated by $2,500.
• C) Assets (inventory) were understated by $2,500 and pretax profit was overstated by $2,500.
• D) Assets (inventory) were understated by $2,500 and pretax profit was understated by $2,500.

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Definitions:

Managerial Positions

Roles or jobs within an organization that involve overseeing, directing, or managing groups or projects.

Random Variable

A variable whose values are outcomes of a random phenomenon and can vary unpredictably.

Independent

In statistics, two events are considered independent if the occurrence of one does not affect the probability of the other.

Standard Deviations

A measure of the amount of variation or dispersion of a set of values from the mean or average.