Inventory at the End of the Current Year Is Overstated

question 55

Multiple Choice

Inventory at the end of the current year is overstated by $20,000. What effect will this error have on the following year's net income?

• A)Net income will be overstated $20,000.
• B)Net income will be understated $20,000.
• C)Net income will be correctly stated.
• D)Net income will be understated $40,000.

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Definitions:

Anticipated Growth Rate

The expected rate at which a company, economy, or investment is projected to grow over a specific period.

Constant Growth Stock

A stock from a company which is expected to grow dividends at a constant rate indefinitely.

Last Dividend

The most recent dividend payment per share distributed to shareholders by a corporation.

Indefinitely

Describes an action or condition that is not expected to end or change in a foreseeable time period.