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

question 170

Multiple Choice

Use this information to answer the following question. $$\begin{array} { | l | r | r | } \hline \text { Accaunt Name } & { \text { Debit } } & { \text { Credit } } \\\hline \text { Sales } & & 300,000 \\\hline \text { Sales Returns and Allowances } & 10,000 & \\\hline \text { Purchases } & 68,000 & \\\hline \text { Purchases Returns and Allowances } & &8 , 0 0 0 \\\hline \text { Freight-In } & 12,000 & \\\hline \text { Selling Eagenses } & 30,000 & \\\hline \text { General and Adninictrative Eagenses } & 110,000 & \\\hline\end{array}$$ 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:

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations or those due within one year, calculated by dividing current assets by current liabilities.

Net Working Capital

The difference between a company's current assets and current liabilities, indicating short-term financial health.

Short-term Bank Loan

A loan borrowed from a bank with a repayment period typically less than one year, often used for immediate liquidity needs.

Fixed Assets

Long-term tangible assets that are used in the operations of a business, such as machinery, buildings, and equipment, and are not expected to be converted into cash in the current or upcoming fiscal year.