An Overstatement of Ending Inventory in One Period Results in

question 118

Multiple Choice

An overstatement of ending inventory in one period results in

• A) no effect on net income of the next period.
• B) an overstatement of net income of the next period.
• C) an understatement of net income of the next period.
• D) an overstatement of the ending inventory of the next period.

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Definitions:

Projected Addition

An estimate of future additions or expansions in a company's operations, assets, or capacities based on planned projects or investments.

Marginal Tax Rate

The rate at which the last dollar of income is taxed, reflecting the percentage of tax paid on any additional income earned.

Retained Earnings

The portion of net income not distributed to shareholders but reserved by the company to reinvest in its core business or to pay debt.