Assume That a $100 Purchase Invoice Received Close to Year-End

question 149

Multiple Choice

Assume that a $100 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 2012 financial reporting?

• A)Cost of sales is understated by $100.
• B)Gross margin is understated.
• C)Sales are understated by $100.
• D)Operating profit is understated by $100.

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Definitions:

Statute of Frauds

A legal principle requiring certain types of contracts to be written and signed by the party to be charged, in order to be legally enforceable.

Real Property

Pertains to land and anything permanently attached to it, such as buildings, including the rights associated with ownership of land.

Uniform Commercial Code

A detailed collection of regulations for overseeing commercial activities in the USA, aimed at standardizing business statutes nationwide.

Sale of Goods

A commercial transaction in which a seller transfers or agrees to transfer goods to a buyer for a monetary consideration, under terms and conditions.