There Is an Error in Computing Ending Inventory in Year

question 117

Multiple Choice

There is an error in computing ending inventory in Year 1. Therefore:

• A) the error will have no effect on Year 2 financial statements.
• B) after three years, the inventory error will counterbalance.
• C) gross profit will continue to be incorrect until an adjusting entry is made.
• D) the total gross profit for Year 1 and Year 2 combined will be correct.

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Definitions:

Factors Of Production

The inputs into the production process. Land, labor, and capital are the three key factors of production.

Diminishing Marginal Returns

A principle stating that as more of a variable input is added to a fixed input, the additional output gained from each new unit of input eventually decreases.

Productivity

The measure of the efficiency of a person, machine, factory, or system in converting inputs into useful outputs.

Technical Assistance

Support provided, typically in the form of expertise or training, to help organizations, countries, or businesses improve their performance.