Rossiter Company Failed to Record a Credit Sale at the End

question 119

Multiple Choice

Rossiter Company failed to record a credit sale at the end of the year, although the reduction in finished goods inventories was correctly recorded when the goods were shipped to the customer. Which one of the following statements is correct?

• A) Accounts receivable was not affected, inventory was not affected, sales were understated, and cost of goods sold was understated.
• B) Accounts receivable was understated, inventory was overstated, sales were understated, and cost of goods sold was overstated.
• C) Accounts receivable was not affected, inventory was understated, sales were understated, and cost of goods sold was understated.
• D) Accounts receivable was understated, inventory was not affected, sales were understated, and cost of goods sold was not affected.

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Definitions:

Returns to Scale

The rate at which output increases in response to proportional increases in all inputs.

Production Function

An equation or graph that shows the output generated from different combinations of inputs, usually focusing on labor and capital.

Marginal Product

The increase in output that results from an additional unit of input.

Returns to Scale

Refers to the rate at which output increases as inputs are proportionately increased, categorizing into increasing, constant, or decreasing returns.