A Purchase on Credit Is Recorded Twice and Not Corrected

question 12

Multiple Choice

A purchase on credit is recorded twice and not corrected during the year-end physical inventory. Which of the following statements correctly describes the impact of this error?

• A) The current year income on the income statement is correct because purchases are overstated and ending inventory is overstated.
• B) The current year balance sheet ending inventory and accounts payable are understated.
• C) The succeeding year income on the income statement is incorrect because beginning inventory is understated.
• D) The succeeding year purchases are understated when the prior year purchases are corrected.

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Definitions:

Invalid

Not legally or factually sound; without force or effect.

Unenforceable

Describes a contract or agreement that, due to legal deficiencies or irregularities, cannot be legally upheld or enforced.

Contract Clause

A provision included in a contract that specifies the obligations, rights, or restrictions for the parties involved.

Restitution

The act of restoring or returning something to its rightful owner or compensating for loss, damage, or injury caused.