Assume That a $500 Purchase Invoice Received Close to Year-End

question 93

Multiple Choice

Assume that a $500 purchase invoice received close to year-end is not recorded in fiscal 2016,but the inventory is appropriately included in the ending inventory count.What impact will this have on fiscal 2017 financial reporting?

• A)Cost of sales is understated by $500.
• B)No effect on gross margin.
• C)Operating expenses are overstated by $500.
• D)Operating profit is overstated by $500.

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Definitions:

Indifference Curves

A graphical representation of different combinations of goods or services among which a consumer is indifferent, showing preferences and trade-offs.

Completeness

In the context of preferences, the assumption that any two bundles of goods can be compared, meaning a consumer can decide if one is preferred, the other is preferred, or they are valued equally.

Transitivity

The concept in decision theory and economics that if preference or choice A is preferred to B, and B is preferred to C, then A must be preferred to C.

Marginal Rate

The additional cost or benefit associated with a small unit change in a variable or activity.