Zinke Company Understated Its Ending Inventory at the End of Year

question 77

Multiple Choice

Zinke Company understated its ending inventory at the end of Year 1.Which of the following correctly states the effect of the error on the amounts shown on the Year 1 financial statements?

• A)Overstatement of total assets and cost of goods sold.
• B)Overstatement of cost of goods sold and retained earnings.
• C)Understatement of liabilities and retained earnings.
• D)Understatement of total assets and gross margin.

Analyze the effects of consecutive discounts and their final impact on cost.

Evaluate the impact of operating expenses on pricing and profit margins.

Apply the concepts of trade discount and net cost calculation in various scenarios.

Determine the profit or loss realized at different selling prices.

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Definitions:

Commercial Air Flights

Flights operated by airlines for the purpose of transporting passengers or cargo as a business.

Automobile

A wheeled motor vehicle used for transporting passengers, which also carries its own engine or motor.

Planning Fallacy

The tendency to underestimate the time, costs, and risks of future actions while overestimating the benefits, leading to poor planning and time management.

Underestimating

The act of judging something to be of lower quantity, value, or importance than it actually is.