Assume That a Purchase Invoice for $1,000 Was Appropriately Recorded

question 52

Multiple Choice

Assume that a purchase invoice for $1,000 was appropriately recorded in fiscal 2016,but the inventory was excluded in error during the ending inventory count.What impact will this have on fiscal 2017 financial reporting?

• A)Gross margin is understated by $1,000.
• B)Cost of goods available for sale is understated by $1,000.
• C)Cost of sales is overstated by $1,000.
• D)Beginning inventory is overstated by $1,000.

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Definitions:

Promoters

Individuals or companies that organize and finance the formation of a corporation or event.

Subscription Agreements

Contracts between a company and investors, detailing the purchase of shares of the company by the investors.

Infant Corporation

A term used to describe a corporation in its early stage of existence, typically considered less capable of meeting legal or financial commitments.

De Facto Corporation

A business that operates as if it were a legally incorporated company, even though it has not completed the required incorporation processes, and may be treated as such by courts under certain conditions.