If Beginning Inventory Is Understated by $1,300 and Ending Inventory

question 38

Multiple Choice

If beginning inventory is understated by $1,300 and ending inventory is understated by $700,pretax profit for the period will be which of the following?

• A)Understated by $600.
• B)Understated by $2,000.
• C)Overstated by $600.
• D)Overstated by $2,000.

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Definitions:

Liquidated Damages

refers to a predetermined sum agreed upon by the parties to a contract, to be paid as compensation in case of breach of contract.

Exemption Clause

A contract term that attempts to limit or exclude liability for certain events or damages.

Deposit Forfeiture

A legal or contractual process wherein a deposit made as part of a transaction is lost due to non-compliance with the terms of the agreement.

Exemption Clause

A contractual term that limits or excludes one party's liability for certain breaches, circumstances, or events.