In 2019,beginning Inventory Is Overstated

question 133

Multiple Choice

In 2019,beginning 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 2020.
• B)Net income is understated in 2019 and 2020.
• C)Net income is understated in 2019 and overstated in 2020.
• D)Net income is understated in 2019 and correctly stated in 2020.

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Definitions:

Annual Cash Flows

The net amount of cash and cash equivalents being transferred into and out of a business over a year, reflecting its operational efficiency and financial health.

Crossover Point

The point at which two or more alternative investments achieve the same cumulative cash flow or rate of return.

Mutually Exclusive

A condition where the occurrence of one event precludes the occurrence of another in decision making or statistical probability.

Discount Rate

The rate applied in DCF assessment to compute the present worth of imminent cash flows.