Use the Following Information for Questions
Dexter, Inc -Assume That the Proper Correcting Entries Were Made at December

question 59

Multiple Choice

Use the following information for questions
Dexter, Inc.is a calendar-year corporation.Its financial statements for the years 2007 and 2006 contained errors as follows: $$\begin{array} { l l l } &{ 2007 } & { 2006 }\\\text { Ending inventory } &{ \$ 3,000 \text { overstated } } & { \$ 8,000 \text { overstated } } \\\text { Depreciation expense } & \$ 2,000 \text { understated } & \$ 6,000 \text { overstated }\end{array}$$
-Assume that the proper correcting entries were made at December 31, 2006.By how much will 2007 income before taxes be overstated or understated?

• A)$1,000 understated
• B)$1,000 overstated
• C)$2,000 overstated
• D)$5,000 overstated

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Definitions:

Monthly Interest Rate

The interest rate charged or paid on a loan or savings account calculated on a monthly basis.

Default Rate

The percentage of borrowers who fail to repay their loans or meet contractual obligations.

Monthly Interest Rate

The percentage of an amount of money which is charged or paid as interest for one month.

Restocking Costs

The expenses associated with replenishing inventory or goods in a business after sales or usage.