Ending Inventory for the Current Accounting Period Is Understated by $2,700.What

question 142

Multiple Choice

Ending inventory for the current accounting period is understated by $2,700.What effect will this error have on Cost of goods sold and Net income?

• A) \[\begin{array} { | c | c | }
• \hline \text { Cost of goods sold } & \text { Net income } \\
• \hline \text { Understated } & \text { Understated } \\
• \hline
• \end{array}\]
• B) \[\begin{array} { | c | c | }
• \hline \text { Cost of goods sold } & \text { Net income } \\
• \hline \text { Overstated } & \text { Overstated } \\
• \hline
• \end{array}\]
• C) \[\begin{array} { | c | c | }
• \hline \text { Cost of goods sold } & \text { Net income } \\
• \hline \text { Understated } & \text { Overstated } \\
• \hline
• \end{array}\]
• D) \[\begin{array} { | c | c | }
• \hline \text { Cost of goods sold } & \text { Net income } \\
• \hline \text { Overstated } & \text { Understated } \\
• \hline
• \end{array}\]

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Definitions:

Discrete Financial Information

Financial data that is separate and distinct, not continuous, often referring to specific reporting periods.

Generate Revenue

The process of creating income for a business through its operations, such as selling goods or providing services.

Managing Director (MD)

The senior-most executive in an organization or business, typically responsible for strategy, decision-making, and day-to-day operations.