If Period 1 Ending Inventory Is Overstated, Then

question 15

Multiple Choice

If Period 1 ending inventory is overstated, then:

• A)both cost of goods sold and net income are understated in Period 1.
• B)cost of goods sold is overstated and net income is understated in Period 1.
• C)cost of goods sold is understated and net income is overstated in Period 1.
• D)both cost of goods sold and net income are overstated in Period 1.

---

Definitions:

Main Determinant

The primary factor or condition that influences an outcome or result.

Price Elasticity of Supply

The measure of how much the quantity supplied of a good responds to a change in the price of that good, computed as the percentage change in quantity supplied divided by the percentage change in price.

Demand-Side

Pertaining to the aspects of the economy influenced by consumer spending and preferences, impacting overall demand for goods and services.

Market Failure

The inability of a market to bring about the allocation of resources that best satisfies the wants of society; in particular, the overallocation or underallocation of resources to the production of a particular good or service because of externalities or asymmetric information, or because markets fail to provide desired public goods.