Upaway Company Hired Some Students to Help Count Inventory During

question 9

Multiple Choice

Upaway Company hired some students to help count inventory during their semester break.Unfortunately,the students added incorrectly and ending inventory was overstated by $12,000.What would be the effect of this error in ending inventory?

• A)Profit would be overstated.
• B)Profit would be understated.
• C)Ending retained earnings would be understated.
• D)Cost of goods sold would be overstated.

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Definitions:

Discounted Cash Flow

An analysis method used to estimate the value of an investment based on its expected future cash flows, adjusted for time value of money.

Initial Investment

The amount of money used to start a project, venture, or purchase an investment, before any returns or profits are considered.

Project Profitability Index

The ratio of the net present value of a project’s cash flows to the investment required.

Internal Rate

Typically refers to the Internal Rate of Return (IRR), a financial metric used to estimate the profitability of potential investments.