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

question 129

Multiple Choice

Assume that a purchase invoice for $1,000 was appropriately recorded in fiscal 2012, but the inventory was excluded in error during the ending inventory count. What impact will this not have on fiscal 2013 financial reporting?

• A)Beginning inventory is understated by $1,000.
• B)Gross margin is overrstated by $1,000.
• C)Cost of sales is understated by $1,000.
• D)Inventory is understated on the balance sheet.

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Definitions:

Market Interest Rate

The rate of interest prevailing in the market that lenders demand and borrowers pay for funds.

Contractual Interest Rate

The agreed-upon rate of interest that is to be applied to the principal amount in a financial contract.

Discount

A reduction in the price of goods or services, typically offered to encourage purchases.

Face Value

the nominal value or original cost of a security as stated by the issuing authority, not necessarily its market value.