A Company Fails to Record One Storeroom Full of Inventory

question 50

Multiple Choice

A company fails to record one storeroom full of inventory in its year-end inventory records.As a result, this will cause:

• A) an overstatement of cost of goods sold for the current year.
• B) an overstatement of inventory on the year-end balance sheet.
• C) an overstatement of retained earnings at the end of the year.
• D) an understatement of gross profit in the following year.

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Definitions:

Good X

A symbolic term often used in economics to represent any generic commodity or product under consideration for analysis.

Units

Measurements or quantities ascertained by established standards used for trading, scientific experiments, and other purposes.

Utility Function

Refers to the model used by economists to estimate the level of utility or satisfaction a consumer derives from the consumption of goods and services, highlighting consumer preferences.

Budget Constraint

A representation of all the combinations of goods and services a consumer can purchase with their income at given prices.