After Issuing Its Financial Statements, a Company Discovered That Its

question 62

Multiple Choice

After issuing its financial statements, a company discovered that its beginning inventory was overstated by $100,000. Its tax rate is 30%. As a result of this error, net income was:

• A) Understated by $70,000.
• B) Overstated by $70,000.
• C) Understated by $30,000.
• D) Overstated by $30,000.

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Definitions:

Issue Debt

The process by which a government, corporation, or other entity raises funds by selling bonds, bills, or other forms of debt instruments.

Working Capital Management

The process of managing the short-term assets and liabilities to ensure a company can continue its operations and meet its financial obligations.

Debt

An amount of money borrowed by one party from another, often used by businesses and governments to fund operations and projects.