Items That Were Incorrectly Omitted from 2013 Credit Purchases, but Correctly

question 26

Multiple Choice

Items that were incorrectly omitted from 2013 credit purchases, but correctly included in the 2013 ending inventory would have the following 2013 effects:

• A) overstate pre-tax income but have no effect on current liabilities.
• B) overstate pre-tax income and understate liabilities.
• C) cancel out with no effect on pre-tax income but would understate current liabilities.
• D) understate pre-tax income but have no effect on liabilities.

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Definitions:

Equilibrium-Price Relationship

The point at which the supply of a good matches its demand, resulting in a stable market price.

Large Position

Holding a significant quantity of a particular stock, bond, or other financial asset, influencing potential risk and return.

Dominance Argument

A concept in portfolio theory suggesting that if one investment dominates another on all measures of performance, it is the preferable choice.

Risk Premium

The extra return expected by investors for holding a risky asset over a risk-free one, compensating for the higher risk.