The Ending Merchandise Inventory Was Overstated

question 114

Multiple Choice

The ending merchandise inventory was overstated. This error would cause:

• A) net income to be understated.
• B) revenue to be understated.
• C) net income to be overstated.
• D) Cost of Goods Sold to be overstated.

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Definitions:

Classified Balance Sheet

A balance sheet that organizes assets and liabilities into current and long-term categories, helping provide a clearer understanding of a company’s financial position.

Balance Sheet

A financial statement that provides a snapshot of a company's financial position, showing assets, liabilities, and shareholders' equity at a specific point in time.

Net Income

The total profit of a company after all expenses, including taxes and operational costs, have been subtracted from its total revenue.

Cost of Goods Sold

Direct spending associated with producing the merchandise a company trades, including both materials and manpower costs.