A Company Deliberately and Inappropriately Included Interest Costs on Its

question 112

Multiple Choice

A company deliberately and inappropriately included interest costs on its December 31 inventory. Which one of the following statements is true for the company's December 31 financial statements?

• A) Earnings per share is understated.
• B) Inventory turnover ratio is understated.
• C) The current ratio is understated.
• D) Cost of goods sold is overstated.

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Definitions:

Express Ratification

The explicit approval or confirmation of an act or contract that was initially unauthorized or in need of validation.

Adjudicated Insane

Adjudicated Insane is a legal determination that an individual is not mentally competent to manage their affairs due to mental illness.

Guardian Appointed

The designation of a person by a court to care for and make decisions for someone unable to do so themselves, such as a minor or an incapacitated adult.

Contracts Voidable

Agreements that may be declared invalid by one or more of the parties involved due to reasons such as fraud, duress, or incapacity, but remain effective unless voided.