The Ending Inventory for the Current Year Is Overstated by $20,000.What

question 59

Multiple Choice

The ending inventory for the current year is overstated by $20,000.What effect will this error have on the following year's Net profit?

• A)Net profit will be overstated by $40,000.
• B)Net profit will be understated by $20,000.
• C)Net profit will be overstated by $20,000.
• D)Net profit will be understated by $40,000.

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Definitions:

Voidable Preferences

Transactions made by a bankrupt debtor prior to bankruptcy that can be nullified or undone to ensure fair distribution of assets to creditors.

Antecedent Debts

Debts that were incurred prior to a particular event or transaction.

Involuntary Petition

A legal document filed by creditors to initiate bankruptcy proceedings against a debtor without the debtor's consent.

Non-Profit

An organization whose primary objective is to support an issue or matter of private interest or public concern for non-commercial purposes, rather than earning profits for its owners or stakeholders.