In 2019,ending Inventory Is Overstated

question 116

Multiple Choice

In 2019,ending inventory is overstated.What is the effect of the error on net income in 2019 and 2020?

• A)Net income is overstated in 2019 and understated in 2020.
• B)Net income is understated in 2019 and overstated in 2020.
• C)Net income is understated in 2019 and 2020.
• D)Net income is overstated in 2019 and 2020.

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Definitions:

Monetary Compensation

Payment given to someone in exchange for their services or to compensate for loss or injury, typically in the form of money.

Receivables Turnover

A financial ratio that measures how effectively a company collects its accounts receivable, calculated by dividing total sales by average accounts receivable.

Inventory Turnover

A measure of how frequently a company sells and replaces its stock of goods during a period, offering insight into sales efficiency and inventory management.

Current Ratio

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