Reported Income for CXC Was Incorrect Due to Two Errors

question 132

Multiple Choice

Reported income for CXC was incorrect due to two errors.One error was the overstatement of ending inventory by $2,000.Which of the following errors, in combination with the inventory error, could cause income to be overstated by $2,500?

• A)Beginning inventory was understated by $500
• B)Expenses were overstated $500
• C)Purchases were understated by $4,500
• D)Accounts receivable was overstated by $4,500
• E)A prepaid expense of $500 was capitalized

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Definitions:

Journal Entry

A record of a financial transaction in the accounting system, showing debits and credits.

Property

Assets owned by an individual or a business, encompassing both tangible (land, buildings) and intangible (patents, trademarks) items.

Funeral Expenses

Costs incurred for services and merchandise related to the burial or cremation of a deceased person.

Journal Entry

A record in the accounting journal that represents a business transaction and reflects changes in accounts.