Ending Inventory for the Current Period Is Understated

question 16

Multiple Choice

Ending inventory for the current period is understated.What effect will this error have on equity?

• A)Equity will be overstated at the end of the current period and overstated at the end of the next period.
• B)Equity will be understated at the end of the current period,but it will be correct at the end of the next period.
• C)Equity will be overstated at the end of the current period,but it will be correct at the end of the next period.
• D)Equity will be overstated at the end of the current period and understated at the end of the next period.

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Definitions:

Salvage Value

The estimated residual value of an asset after it has reached the end of its useful life.

Working Capital

The gap between an enterprise's immediate assets and liabilities, showcasing the available liquidity for its daily activities.

Pretax Return

The income generated from an investment before the deduction of any taxes.

Sales Revenues

The total income generated from the sale of goods and services by a company before any costs or expenses are deducted.