Merchandise Inventory at the End of the Year Is Overstated

question 128

Multiple Choice

Merchandise inventory at the end of the year is overstated.Which of the following statements correctly states the effect of the error?

• A)stockholders' equity is overstated
• B)cost of merchandise sold is overstated
• C)gross profit is understated
• D)net income is understated

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Definitions:

Wheel Bearings

Mechanical assemblies that enable the wheels of a vehicle to rotate smoothly and with reduced friction on their axles.

Supply Reservoir

A storage tank or container that holds a supply of fluid, such as fuel, hydraulic fluid, or air, for use in various systems of a vehicle or machinery.

Primary Circuit

In brake systems, refers to the lead circuit in the system; in hydraulic brake systems on straight trucks this is usually the front brake circuit, whereas on large trucks with air brakes, it refers to the brakes over the tandem drive wheels.

Brake Dynamometer

A testing device that measures the force generated by a brake, converting it into measurable torque.