Suppose That Hastings Corporation Overstates Its Ending Inventory for 2012

question 139

Multiple Choice

Suppose that Hastings Corporation overstates its ending inventory for 2012.What effect will this have on the reported amount of cost of goods sold for 2012?

• A)Overstate cost of goods sold.
• B)Understate cost of goods sold.
• C)Have no effect on cost of goods sold.
• D)Cannot be determined given the information provided.

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Definitions:

Deferred Income Taxes

The accounting concept that recognizes the tax effect of transactions in different periods than when the transactions actually occur.

Effective Tax Rate

The average rate at which an individual or corporation is taxed, calculated by dividing the total tax paid by the taxable income.

Bond Premium

The amount by which the market price of a bond exceeds its face value.

Goodwill Impairment

A decrease in the value of goodwill, which occurs when the carrying amount of a company's goodwill exceeds its fair value.