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

question 145

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 2020 financial reporting?

• A)Gross margin is understated by $1,000.
• B)Cost of sales is overstated by $1,000.
• C)Ending inventory is not affected by the prior year inventory counting error.
• D)Beginning inventory is overstated by $1,000.

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Definitions:

Tax Consequence

The financial effects that taxes have on various financial decisions, affecting net investment income or costs.

Marginal Tax Rate

Marginal Tax Rate is the rate at which the last dollar of income is taxed, reflecting the percentage of tax applied to your next dollar of income.

Cash Flow Estimate

An assessment of the amount of money expected to flow in and out of a business over a specific period.

Marginally Profitable

Describes a business or investment that generates a slight profit above its break-even point.