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

question 59

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 have on fiscal 2012 financial reporting?

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

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Definitions:

Transaction Costs

Expenses incurred when buying or selling goods and services, which can include fees, taxes, and other charges.

Tax Implications

The effect that various financial decisions have on one's tax liability, including income generation, investments, and deductions.

Flotation Costs

Expenses incurred by a company in issuing new securities, including fees to underwriters, lawyers, and accountants.

Administrative Fees

Charges that cover the operational costs of managing investments or conducting transactions.