A $15,000 Overstatement of the 20X2 Ending Inventory Was Discovered

question 158

Multiple Choice

A $15,000 overstatement of the 20X2 ending inventory was discovered after the financial statements for 20X2 were prepared. What was the effect of the inventory error on the 20X2 financial statements?

• A) Current assets were overstated and profit was understated.
• B) Current assets were understated and profit was understated.
• C) Current assets were understated and profit was overstated.
• D) Current assets were overstated and profit was overstated.

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Definitions:

Market Structure

The organizational characteristics of a market, influencing competition and pricing, including perfect competition, monopolistic competition, oligopoly, and monopoly.

Oligopoly

A market structure characterized by a small number of firms dominating the market, often leading to limited competition.

Monopolistic Competition

A market structure characterized by many firms offering products or services that are similar but not perfect substitutes, leading to each firm having some market power.

Differentiated Products

Goods or services that are distinguished from others based on quality, features, or brand, making them non-identical and often allowing for market power.