If the Amount Assigned to Ending Inventory Is Incorrect

question 46

Multiple Choice

If the amount assigned to ending inventory is incorrect,

• A)the balance sheet is affected, but the income statement is not.
• B)the income statement is affected, but the balance sheet is not.
• C)the balance sheet is affected, but cost of goods sold is not.
• D)both the balance sheet and income statement are affected.

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Definitions:

Cash Flow Uncertainty

The unpredictability regarding the amounts and timing of cash flows into or out of a business.

Marketable Securities

Short-term financial instruments that are easily convertible into cash, such as government bonds or certificates of deposit.

NPV

Net Present Value; a method used in capital budgeting to evaluate the profitability of an investment or project by calculating the difference between the present value of cash inflows and outflows.

Lockbox Services

Banking services that speed up the collection of payments from customers by using a special post office box accessible by the bank.