An Item of Inventory Purchased This Period for $15

question 116

Multiple Choice

An item of inventory purchased this period for $15.00 has been incorrectly written down to its current replacement cost of $10.00. It sells during the following period for $30.00, its normal selling price, with disposal costs of $3.00 and normal profit of $12.00. Which of the following statements is not true?

• A) The cost of sales of the following year will be understated.
• B) The current year's income is understated.
• C) The closing inventory of the current year is understated.
• D) Income of the following year will be understated.

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Definitions:

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