Merchandise Inventory at the End of the Year Was Understated

question 42

Multiple Choice

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

• A) Net income is understated.
• B) Net income is overstated.
• C) Cost of merchandise sold is understated.
• D) Merchandise inventory reported on the balance sheet is overstated.

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Definitions:

Legal Doctrine

A framework, set of rules, procedural steps, or test, often established by precedent in the common law, for making a determination in a lawsuit.

Employers Liable

Pertains to the legal responsibility of employers for the actions of their employees and for providing a safe working environment.

National Labor Relations Act

A foundational statute in United States labor law that guarantees workers the right to form unions, engage in collective bargaining, and take collective action such as strikes.

Bargaining Power

The relative capacity of parties in a negotiation to exert influence over each other. If one party is significantly stronger than the other, they are said to have greater bargaining power.