When Ending Inventory Is Overstated in Period 1, Net Income

question 41

Multiple Choice

When ending inventory is overstated in period 1, net income in period 2 will be

• A) Understated
• B) Overstated
• C) Stated correctly
• D) None of these are correct

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Definitions:

Unearned Subscription Revenue

Unearned subscription revenue is a liability that represents payments received from customers for services yet to be delivered.

Subscription Revenue

Income received by a company for providing ongoing services or access to products over a subscription period.

Subscriptions Receivable

Amounts owed to a company for goods or services that have been subscribed to but not yet paid for by customers.

Current Liability

Financial obligations or debts of a company due within a year, including accounts payable, taxes owed, and short-term loans.