A Cutoff Test Reveals Goods Received and Counted in Inventory

question 7

Multiple Choice

A cutoff test reveals goods received and counted in inventory but not recorded in purchases.The effect on the financial statements is

• A) Net income is overstated.
• B) Net income is understated.
• C) There is no effect because the inventory records were adjusted to the physical count.
• D) Net income is not affected until the subsequent period.

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Definitions:

Matrilineal Descent

Descent traced exclusively through the female line of ancestry to establish group membership.

Husband And Wife

A legally recognized partnership, typically involving a man and a woman in a committed intimate relationship, forming the basis of a family unit.

Household Organization

Describes the structure and management of a household or family unit, including roles, responsibilities, and relationships among members.

Industrial Societies

Societies characterized by a reliance on mechanized labor and an emphasis on manufacturing and industrial production.