If the Ending Inventory in Period 1 Is Understated, Gross

question 48

Multiple Choice

If the ending inventory in Period 1 is understated, gross profit for Year 1 is:

• A)overstated.
• B)understated.
• C)not affected.
• D)determined by beginning inventory.

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Definitions:

Loss

Occurs when a company's expenses exceed its revenues, resulting in a negative profit.

Discount on Bonds Payable

The difference between the face value of bonds and their selling price, when the bonds are sold for less than their face value.

Redeems

The act of exchanging something such as coupons, vouchers, or securities for goods, services, or money.

Gain

Financial benefit realized from activities such as the sale of an asset for more than its original purchase price.