Assume That a Purchase Invoice for $1,000 Was Appropriately Recorded

question 69

Multiple Choice

Assume that a purchase invoice for $1,000 was appropriately recorded in fiscal 2019, but the inventory was excluded in error during the ending inventory count. What impact will this have on fiscal 2019 financial reporting?

• A)Cost of goods sold is understated by $1,000.
• B)Gross margin is overstated by $1,000.
• C)Ending inventory is understated by $1,000.
• D)Net income is overstated by $1,000.

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Definitions:

Statement of Cash Flows

A financial documentation that illustrates the effect of changes in balance sheet accounts and profit on cash and cash equivalents, dividing the analysis into categories of operating, investing, and financing activities.

Noncash Investing

Investing activities that do not involve the immediate outflow of cash, such as acquiring assets through finance leases.

Financing Activities

Financing activities are transactions involving changes in the size and composition of the equity and borrowings of a company.

Statement of Cash Flows Worksheet

A detailed working paper used in the preparation of the statement of cash flows that reconciles beginning and ending cash balances by analyzing changes in all other accounts.