The Accountant for Angie Company Made the Following Errors Related

question 97

Multiple Choice

The accountant for Angie Company made the following errors related to purchases of merchandise and ending inventory in 2016:
1) A $2,200 purchase of merchandise on credit was not recorded or included in ending inventory.
2) A $3,180 purchase of merchandise on credit was recorded, but it was inadvertently omitted from the end-of-year physical inventory count.
Assuming a periodic inventory system, Angie's Company's 2016 net income will be

• A) understated by $3,180.
• B) understated by $2,380.
• C) overstated by $5,380.
• D) overstated by $3,180.

---

Definitions:

Tax Liability

The total amount of taxes owed by an individual or a corporation to the tax authorities.

Negative Income Tax

A proposed system of social security that guarantees a minimum income to all, where those earning below a certain amount receive supplemental pay from the government instead of paying taxes.

Income Subsidy

An income subsidy is a government-provided financial assistance program intended to boost an individual's income to a level sufficient for meeting basic living standards.

Negative Income Tax

A program where the government provides additional income to those who earn under a specific threshold, rather than collecting taxes from them.