Ending Inventory for the Current Period Is Understated

question 1

Multiple Choice

Ending inventory for the current period is understated. What effect will this error have on equity?

• A)Equity will be overstated at the end of the current period and overstated at the end of the next period.
• B)Equity will be overstated at the end of the current period, but it will be correct at the end of the next period.
• C)Equity will be overstated at the end of the current period and understated at the end of the next period.
• D)Equity will be understated at the end of the current period, but it will be correct at the end of the next period.

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Definitions:

IFRS

International Financial Reporting Standards, which are a set of accounting standards developed by the International Accounting Standards Board (IASB) that guide the preparation of financial statements globally.

Convertible Notes

A form of short-term debt that converts into equity, typically in conjunction with a future financing round, under specific terms.

Interest Expense

The cost incurred by an entity for borrowing funds, typically reported on the income statement.

Basic EPS

A measure of a company's performance that divides earnings available to common shareholders by the average number of common shares outstanding.