Iona Corporation's Ending Inventory as of December 31, Year 1

question 9

True/False

Iona Corporation's ending inventory as of December 31, Year 1, was overstated by $28,000. Indicate whether each of the following statements relating to the above error is true or false.________ a)Cost of goods sold is overstated in Year 1 by $28,000.________ b)Net Income is overstated in Year 1 by $14,000.________ c)Retained Earnings at December 31, Year 1 is overstated by $28,000.________ d)Beginning inventory will be understated in Year 2 by $28,000.________ e)Retained Earnings will not be affected by this error at the end of Year 2.

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Definitions:

Mortgage Rate

The interest rate charged on a mortgage, typically expressed as an annual percentage.

GST

Goods and Services Tax, a type of value-added tax imposed on the majority of goods and services that are sold within the country for local use.

Supplies

Materials and goods held for use in the production process or office operations, often considered short-term assets in financial accounting.

GST and PST

Taxes applied to the sale of goods and services; GST is a federal tax in Canada, while PST is a provincial sales tax.