If the Inventory Account at the End of the Year

question 41

Multiple Choice

If the inventory account at the end of the year is understated, the effect will be to

• A)overstate the gross profit on sales.
• B)understate the net purchases.
• C)overstate the cost of goods sold.
• D)overstate the goods available for sale.

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Definitions:

Annual

Relating to or denoting a period of one year.

Nominal Rate

The stated interest rate of a financial product, not adjusted for inflation, representing the face value of interest payments.

Real Rate

The interest rate adjusted for inflation, reflecting the true cost of borrowing or the true yield on an investment.

Inflation Rate

The tempo at which the widespread level of prices for goods and services heightens, detracting from the ability to spend.