JP Corporation Had Net Income of $1,000,000 for 2012

question 8

Multiple Choice

JP Corporation had net income of $1,000,000 for 2012. After issuing its financial statements, the corporation realized that it had failed to include inventory from one of its small warehouses for two years. Specifically, it forgot to include $20,000 on December 31, 2011 and $30,000 on December 31, 2012. Which of the following is true regarding JP's 2011 net income?

• A)Net income was understated by $10,000.
• B)Net income was overstated by $10,000.
• C)Net income was understated by $30,000.
• D)Net income was overstated by $30,000.

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Definitions:

Partnership Supplies

Goods, equipment, or resources provided for the operation of a partnership or shared business venture.

RUPA

The Revised Uniform Partnership Act, which provides a framework for the governance of business partnerships in several states.

Equal Share

A portion or percentage of something, such as profits or ownership, that is distributed equally among all members or parties involved.

Silent Partner

An investor in a partnership who contributes capital but does not take part in the management or daily operations of the business.