In 2015,ending Inventory Is Overstated

question 48

Multiple Choice

In 2015,ending inventory is overstated.What is the effect of the error on net income in 2015 and 2016?

• A)net income is overstated in 2015 and understated in 2016
• B)net income is understated in 2015 and overstated in 2016
• C)net income is understated in 2015 and 2016
• D)net income is overstated in 2015 and 2016

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Definitions:

Effective Interest Rate

Represents the real cost of borrowing or the real yield on an investment, accounting for compounding periods within a year.

Annual Payments

Regular payments made once per year towards the principal and/or interest of a loan or financial obligation.

Nominal Rate

The interest rate stated on a loan or investment agreement, not accounting for inflation or compounding effects.

Semi-Annual Payments

Payments made twice a year, often used in the context of loan repayments or bond interest payments.