What Is the Impact on the Financial Statements of an Overstatement

question 107

Multiple Choice

What is the impact on the financial statements of an overstatement of ending inventory?

• A)Next year's ending inventory will be overstated.
• B)Next year's net income will be overstated.
• C)Current year's net income will be overstated.
• D)Next year's ending inventory will be understated.

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Definitions:

Marginal Benefit

The additional benefit derived from producing one more unit of a good or service.

Accounting Profit

The total revenue of a business minus its explicit costs; essentially the net income reported on the financial statements.

Economic Profit

The difference between the total revenue received by a business and the total costs, including both explicit and implicit costs.

Overhead

Ongoing business expenses not directly attributed to creating a product or service.