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

question 118

Multiple Choice

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

• A) The inventory overstatement will not affect Net income.
• B) Net income will be overstated by $20,000.
• C) Net income will be understated by $20,000.
• D) Net income will be understated by $40,000.

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Definitions:

Actor-Observer Bias

A cognitive bias that involves attributing one's own actions to external factors while attributing others' actions to their character or personality.

Self-Serving Bias

A cognitive bias where people attribute positive outcomes to their own actions and negative outcomes to external factors.

Basketball Game

A team sport involving two teams of five players each, aiming to score points by shooting a ball through an opponent's hoop.

Fundamental Attribution Error

The tendency to overestimate the influence of personality and underestimate the influence of situational factors when evaluating others' behaviors.