If in the Current Year a Purchase Was Not Recorded

question 108

Multiple Choice

If in the current year a purchase was not recorded but the purchased item was included in ending physical inventory, which one of the following situations occurs for the current year?

• A)Working capital is understated, and net income is overstated.
• B)Working capital and net income are understated.
• C)Working capital is overstated, and net income is understated.
• D)Working capital and net income are overstated.

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Definitions:

Finished-Goods Inventories

Stock of completed products ready for sale or shipment to customers, held by a company at any given time.

Annual Holding Cost

The total expenses associated with storing inventory over the course of a year, including warehousing, insurance, spoilage, and obsolescence.

FedEx

A multinational delivery services company known for its overnight shipping service and pioneering a system that could track packages and provide real-time updates on package location.

Facility Cost

Expenses related to the physical buildings, utilities, and equipment required to operate a business.