A Company Recorded an Acquisition of Merchandise and Its Related

question 57

Multiple Choice

A company recorded an acquisition of merchandise and its related liability, but failed to include the merchandise in ending inventory. The effect on the financial statements was to

• A) understate liabilities.
• B) understate net income.
• C) overstate net income.
• D) have no impact on the financial statements since the errors cancel each other out.

Understand the preparation and significance of financial statements in the accounting cycle.

Differentiate between real and nominal accounts.

Explain the nature of accumulated depreciation in accounting records.

Clarify the misconceptions about the accounting cycle and common practices.

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Definitions:

Mode

The value or values that occur most frequently in a data set.

Skewed

A term describing a distribution that is asymmetric, leaning towards one side, either to the left or right, indicating a deviation from the normal distribution.

Sample Mean

The average value calculated from a sample, used as an estimate of the population mean.

Extroverted

A personality characteristic marked by the ability to be social, engage in conversation easily, show confidence, and exhibit a strong capacity for expressing emotions.