The Physical Count of Inventory Was Incorrect, Which Overstated the Ending

question 117

Multiple Choice

The physical count of inventory was incorrect, which overstated the ending inventory. This would cause:

• A) Cost of Goods Sold to be overstated.
• B) Cost of Goods Sold to be understated.
• C) gross profit to be understated.
• D) operating expenses to be understated.

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Definitions:

Financial Statement

A written report that quantitatively describes the financial health of a company, including balance sheet, income statement, and cash flow statement.

Permanent/Temporary

Designations for accounts or job positions that indicate if they are expected to last indefinitely or have a fixed duration, respectively.

Gross Method

An accounting method for recording purchases at the invoice amount without deducting any discounts offered.