Merchandise Inventory at the End of the Year Is Overstated

question 9

Multiple Choice

Merchandise inventory at the end of the year is overstated. Which of the following statements correctly states the effect of the error?

• A) owner's equity is overstated
• B) cost of merchandise sold is overstated
• C) gross profit is understated
• D) net income is understated

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Definitions:

Social Class

A categorization of society according to socio-economic levels.

Mental Illness

A broad range of medical conditions that affect mood, thinking, and behavior, often requiring treatment and support.

Poverty

Poverty is a socio-economic condition characterized by a lack of financial resources and access to basic needs such as food, shelter, and healthcare.

African Americans

A racial or ethnic group in the United States with ancestors who are predominantly from Sub-Saharan Africa.