If the Ending Inventory Is Overstated by $18,000 in 20X3,and

question 35

Multiple Choice

If the ending inventory is overstated by $18,000 in 20X3,and assuming a constant 30% tax rate,then what will be the effect on net income in 20X4?

• A)Net income will be understated by $5,400 in 20X4.
• B)Net income will be overstated by $5,400 in 20X4.
• C)Net income will be understated by $12,600 in 20X4.
• D)Net income will be overstated by $12,600 in 20X4.
• E)Net income will not be overstated or understated in 20X4.

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Definitions:

Third-Party Logistics

External companies hired to manage all or part of another company’s logistics functions, including transportation, warehousing, and distribution.

Outsourcing

The practice of hiring third parties to perform services or produce goods traditionally performed or made in-house, to reduce costs or improve efficiency.

Logistics

The process of planning, implementing, and controlling the efficient flow and storage of goods, services, and related information from point of origin to point of consumption.

Company Coalition

A temporary alliance or partnership between companies to achieve a common objective, often strategic or operational.