If Ending Inventory in Period 1 Is Understated, Cost of Goods

question 57

Multiple Choice

If ending inventory in Period 1 is understated, Cost of Goods Sold in Period 2 is:

• A)overstated.
• B)understated.
• C)not affected.
• D)the same as in Period 1.

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Definitions:

Reportable Segments

These are operational segments of a business that have distinct financial data available, and whose results are regularly reviewed by the entity’s chief operating decision maker.

Profits Test

A criterion used to evaluate the profitability of a business or investment, often assessing whether revenues exceed costs or expenses to determine financial viability.

Assets Test

A financial measure used to determine eligibility for certain government benefits based on the value of one's assets.

Profit Test

A determination to assess the viability and profitability of a project or investment by comparing costs against potential benefits.