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

question 60

Multiple Choice

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

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

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Definitions:

Actual Situation

The real and current state or condition of something, as opposed to what was planned or expected.

Desired Situation

The ideal or preferred state or outcome that an individual or organization aims to achieve.

Environment of Risk

The context or situation that is characterized by uncertainty and potential for loss or harm in decision-making and actions.

Complete Information

A condition in decision-making where all relevant data and potential outcomes are known and accessible.