JP Corporation Had Net Income of $1,000,000 for 2016

question 139

Multiple Choice

JP Corporation had net income of $1,000,000 for 2016.After issuing its financial statements,the corporation realized that it had failed to include inventory from one of its small warehouses for two years.Specifically,it forgot to include $20,000 on December 31,2015 and $30,000 on December 31,2016.Which of the following is TRUE regarding JP's 2015 net income?

• A)Net income was understated by $10,000.
• B)Net income was overstated by $10,000.
• C)Net income was understated by $30,000.
• D)Net income was overstated by $30,000.

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Definitions:

Net Book Value

The value of an asset after accounting for depreciation or amortization, representing its current worth on the balance sheet.

Investment Centres

Units or divisions within a company that are responsible for making investment decisions and are evaluated based on their return on investments.

Return On Investment

A financial metric used to evaluate the efficiency or profitability of an investment, calculated as the return relative to the investment’s cost.

Residual Income

A measure of performance and profitability calculated as the net operating income after deducting a charge for the cost of capital.