The Accountant for Lee Company Made the Following Errors Related

question 54

Multiple Choice

The accountant for Lee Company made the following errors related to merchandise inventory in 2014:
1.The beginning inventory for 2014 was overstated by $750 due to an error in the physical count.
2.A $1,300 purchase of merchandise on credit was not recorded or included in the ending inventory.
Assuming a periodic inventory system, Lee Company's 2014 cost of goods sold will be

• A) understated by $550
• B) understated by $1,850
• C) overstated by $1,850
• D) overstated by $750

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Definitions:

Consumer's Optimal

The point at which the combination of goods and services purchased by a consumer provides maximum satisfaction or utility, given the consumer's income and the prices of goods.

Price of Good

The amount of money required to purchase a specific good or service.

Substitution Effect

The economic principle that as prices rise or incomes decrease, consumers replace more expensive items with less costly alternatives.

Price Decrease

A reduction in the cost of goods or services, typically resulting from factors such as increased supply, decreased demand, or external market conditions.