Your Client Performed the Physical Count of Inventory as of November

question 42

Multiple Choice

Your client performed the physical count of inventory as of November 30,one month prior to year-end.Subsequently,your client closed the sales journal on 12/29/XX,two days before year-end,and reported those two days' credit sales in January of the next year.Assuming the client uses a perpetual inventory system,which of the following is most likely to be overstated relating to the year XX financial statements?

• A)Sales.
• B)Cash.
• C)Inventory.
• D)Accounts receivable.

---

Definitions:

Allowance

An accounting adjustment that reduces the value of an asset or increases a liability to reflect probable future costs.

Net Credit Sales

The total revenue from sales made on credit, minus any returns or allowances, reflecting the actual credit sales revenue generated by a business.

Uncollectible Accounts

Accounts receivable that are unlikely to be paid by customers and are considered bad debts.

Cash Realizable Value

The amount of cash expected to be received from assets or receivables after accounting for discounts or allowances.