In 2019,ending Inventory Is Overstated

question 48

Multiple Choice

In 2019,ending inventory is overstated.What is the effect of the error on total stockholders' equity in 2019 and 2020?

• A)Total stockholders' equity is overstated in 2019 and 2020.
• B)Total stockholders' equity is understated in 2019 and 2020.
• C)Total stockholders' equity is overstated in 2019 and correctly stated at the end of 2020.
• D)Total stockholders' equity is overstated in 2019 and understated in 2020.

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Definitions:

Amortization Expense

The gradual reduction of a debt over time or the allocation of the cost of an intangible asset over its useful life.

Fair Value

The revenue generated from liquidating an asset or cost of moving a liability in a coordinated market operation on the day of measurement.

Undervalued Patent

A patent whose market value is below its potential economic value due to unrecognized or underappreciated benefits or applications.

Overvalued Equipment

Refers to assets recorded at a value higher than their actual market worth, potentially leading to inaccuracies in financial statements.