Two Separate Errors Affected Satellite City in 2018

question 125

Multiple Choice

Two separate errors affected Satellite City in 2018. The beginning inventory was understated by $28,000 and the ending inventory was understated by $43,000. Net income in 2019 will be:

• A)overstated by $15,000.
• B)overstated by $43,000.
• C)understated by $43,000.
• D)understated by $71,000.

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Definitions:

Fixed Assets

Assets that are of a permanent or long-term nature, typically used in the operations of a business, such as buildings, machinery, and equipment.

Full Capacity

The maximum level of output that a company can sustain within a given period, utilizing all available resources efficiently.

Fixed Assets

Long-term tangible assets, such as buildings and machinery, used in the operations of a business that are not expected to be converted into cash within a year.

Unused Capacity

The existing but not currently utilized production or operational capacity within a business.