If Stevens Co $\begin{array} { c c } \text { Effect on Cost of Goods Sold } & \text { Effect on Net Income } \\\end{array}$

question 48

Short Answer

If Stevens Co.overstates its ending inventory for the current year,what are the effects on cost of goods sold and net income for the current year?
$\begin{array} { c c } \text { Effect on Cost of Goods Sold } & \text { Effect on Net Income } \\\end{array}$
a. $\begin{array} { c c } &&&\text { Understated } &&&&& \text { Overstated } \\\end{array}$

b. $\begin{array} { c c } &&&\text { Overstated } &&&&&& \text { No effect } \\\end{array}$

c. $\begin{array} { c c } &&&\text { Understated } &&&&& \text { Understated } \\\end{array}$

d. $\begin{array} { c c } &&&\text { Overstated }&&&& & \text { Overstated }\end{array}$

---

Definitions:

Written Contract

A legally binding agreement between two or more parties that is expressed in written form.

Modified Comparative Negligence

A legal doctrine under tort law that allows for the plaintiff to recover damages even if they are partially at fault, but only if their responsibility is below a certain percentage.

Percentage Of Fault

A legal determination in some jurisdictions of how much each party is at fault in a liability case, affecting the allocation of damages.

Contributory Negligence

A legal doctrine that may limit or bar recovery in a lawsuit if the plaintiff also contributed to the harm they suffered.