Newcastle Company Has the Following Inventory Data for the Current

question 136

Multiple Choice

Newcastle Company has the following inventory data for the current period: Assume that the ending inventory is overstated by $5,000.What is the effect on the current period's net income and on the following period's net income?

• A)Net Income this period will be overstated by $5,000 and next period will be understated by $5,000.
• B)Net income this period will be understated by $5,000 and next period will be understated by $5,000.
• C)Net income this period will be overstated by $5,000,but next period will be correctly stated.
• D)Net income this period will be understated by $5,000 and next period will be overstated by $5,000.

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Definitions:

Traditional Measurement

A method of evaluating performance or progress using long-established standards or units.

Return On Investment

A measure used to evaluate the performance of an investment by dividing the net profit by the initial cost of the investment.

Cost Variance

The difference between the estimated cost of a project or operation and the actual cost incurred.

Balanced Scorecard

A strategic planning and management system that organizations use to communicate what they are trying to accomplish, align day-to-day work with strategy, and monitor performance against strategic goals.