An Error in the Ending Inventory for the Year Ended

question 52

Multiple Choice

An error in the ending inventory for the year ended December 31, 2010:

• A)automatically creates errors in cost of goods in the 2010 and 2011 financial statements.
• B)has no effect on the 2010 financial statements, but will create an error in the 2011 financial statements.
• C)automatically creates errors in the ending inventory balance in the 2010 and 2011 financial statements.
• D)affects only the 2010 financial statements.

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Definitions:

Adjusting Entry

An accounting journal entry made at the end of an accounting period to allocate income and expenditures to the appropriate period.

Bad Debt Expense

The cost associated with accounts receivable that a company does not expect to collect due to customer default.

Allowance For Doubtful Accounts

The contra asset account for accounts receivable.

Adjusting Journal Entry

A record in accounting that is used to adjust incomes and expenses to match the accounting period in which they actually occurred.