An Understatement of Year 1's Ending Inventory Will

question 92

Multiple Choice

An understatement of year 1's ending inventory will

• A)cause year 2's cost of goods sold to be overstated.
• B)result in an understatement of year 2's beginning inventory.
• C)not affect year 2's ending owner's equity.
• D)have no effect on year 2's gross margin.

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Definitions:

Security Interest

A legal claim or right granted in an asset as collateral to ensure the fulfilment of an obligation, typically repayment of a loan.

Legal Remedy

The means through which a court of law enforces a right, imposes a penalty, or makes another court order to impose its will.

Purchase-Money Security Interest

A legal claim that allows a creditor priority in reclamation over the bought property if the debtor defaults on a loan used to purchase the property.

Security Interest

A legal claim or right granted on an asset as a security for the performance of an obligation, such as the repayment of a loan.