A Company Using the Periodic Inventory Method Correctly Recorded a December

question 46

Multiple Choice

A company using the periodic inventory method correctly recorded a December 29 purchase of merchandise, but the merchandise was not included in the physical inventory count on December 31 (end of the accounting period) . The error caused an:

• A) understatement of inventory, purchases, and accounts payable.
• B) overstatement of both income and assets by the same amount.
• C) understatement of both income and assets by the same amount.
• D) overstatement of inventory, purchases, and accounts payable.

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Definitions:

Proper Name

A specific reference to a unique individual, place, or thing, typically starting with a capital letter and used to give identity.

Limited Partnership's Property

Assets owned by a limited partnership, which are used for the partnership's business and may be subject to claims by creditors, separate from the personal assets of the partners.

Gift

Something given voluntarily without payment in return, as to show favor toward someone or honor an occasion.

Ownership Interest

A legal or equitable right, claim, or stake in property, giving the holder some degree of control or participation in the property's benefits, like income, or decision-making.