Use This Information to Answer the Following Question In Addition,beginning Merchandise Inventory Was $22,000 and Ending Merchandise Inventory

question 124

Multiple Choice

Use this information to answer the following question. $\begin{array}{|l|r|r|}\hline \text { Account Name } & \text { Debit } & \text { Credit } \\\hline \text { Sales } & & 300,000 \\\text { Sales Returns and Allowances } & 10,000 & \\\text { Purchases } & 68,000 & \\\text { Purchases Returns and Allowances } & & 8,000 \\\text { Freight-In } & 12,000 & \\\text { Selling Expenses } & 30,000 & \\\text { General and Administrative Expenses } & 110,000 & \\\hline\end{array}$ In addition,beginning merchandise inventory was $22,000 and ending merchandise inventory was $14,000.
If beginning and ending merchandise inventories were ignored in computing net income,then net income would be

• A) understated by $22,000.
• B) overstated by $8,000.
• C) understated by $14,000.
• D) understated by $8,000.

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Definitions:

Comprehensive Income

The total change in equity for a business enterprise during a period from transactions and other events from non-owner sources.

Available-For-Sale Securities

Financial investments that a company holds with the intent of selling for a profit but are not actively traded or held to maturity.

Unrealized Loss

A loss that occurs on paper due to the decrease in value of an investment but has not yet been realized through actual sale or exchange.

Net Income

Net income is the total profit of a company after all expenses and taxes have been deducted from revenue. It is often referred to as the bottom line.