Ending Inventory for the Current Period Is Understated

question 69

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

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Definitions:

Cosurety

One of two or more individuals or entities jointly responsible for fulfilling the obligation of a surety, sharing liability for ensuring the performance or payment of an obligation.

Right of Contribution

The legal right of a defendant or debtor to collect from co-defendants or co-debtors their share of a common liability or debt.

Right of Subrogation

is a legal right allowing one party to assume another's rights in order to pursue recovery from a third party responsible for a loss.

Debtor's Surety

An individual or entity that guarantees the debt of a borrower, agreeing to be responsible for the repayment if the debtor fails to settle the debt.