An Analysis of a Company's Inventory Indicates That Inventory at the End

question 34

Multiple Choice

An analysis of a company's inventory indicates that inventory at the end of 2020 was understated by $30,000 due to an inventory count error. Inventory at the end of 2021 was correctly stated. The company uses the periodic system of inventory and its fiscal year-end is December 31. Given this information, which of the following statements is correct?

• A)The net income of 2020 is overstated and a retrospective correction should be made.
• B)The net income of 2021 is overstated and should be corrected.
• C)The 2021 year-end retained earnings are overstated and a prospective correction should be made.
• D)The net income of 2021 is understated and should be corrected.

---

Definitions:

Core Competency

A special strength that gives an organization a competitive advantage.

Emotional Intelligence

The capacity to comprehend, utilize, and control one's emotions positively to reduce stress, communicate efficiently, empathize with others, surmount obstacles, and resolve conflicts.

Market Share

The portion of a market controlled by a particular company or product, often expressed as a percentage of total sales.

Skilled Workforce

An employment group that has specialized training, knowledge, and abilities in particular fields.