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

question 55

Multiple Choice

Assume that a $500 purchase invoice received close to year-end is not recorded in fiscal 2012, but the inventory is appropriately included in the ending inventory count. What impact will this have on fiscal 2013 financial reporting?

• A)Cost of sales is understated by $500.
• B)Gross margin is understated.
• C)Operating expenses are overstated by $500.
• D)Operating profit is overstated by $500.

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Definitions:

Stereochemical

Pertaining to the spatial arrangement of atoms within molecules and how this influences the properties and reactions of those molecules.

Limonene

A major component in the oil of citrus fruit peels, known for its distinctive lemon or orange aroma.

Terpene

A class of natural compounds built from isoprene units, characterized by their strong odors and roles in plant physiology and ecology.

Ozone

Ozone is a triatomic molecule, consisting of three oxygen atoms, known for its sharp smell and its role in the Earth's stratosphere, where it absorbs the majority of the sun's harmful ultraviolet radiation.