Merchandise Inventory at the End of the Year Was Inadvertently

question 177

Multiple Choice

Merchandise inventory at the end of the year was inadvertently overstated. Which of the following statements correctly states the effect of the error on net income, assets, and owner's equity?

• A) Net income is overstated, assets are overstated, and owner's equity is understated.
• B) Net income is overstated, assets are overstated, and owner's equity is overstated.
• C) Net income is understated, assets are understated, and owner's equity is understated.
• D) Net income is understated, assets are understated, and owner's equity is overstated.

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Definitions:

Social

Referring to the activities that involve interactions among people and communities.

Self-actualization

A person's realization or fulfillment of their talents and potentialities, considered as a drive or need present in everyone.

Physiological

Physiological pertains to the functions and processes of the organs and systems within a living organism, often studied in the context of health and disease.

Maslow Hierarchy

A psychological theory proposed by Abraham Maslow that suggests human needs are arranged in a hierarchy, starting from basic needs such as food and shelter up to self-actualization.