What Is the Effect on Net Income If a Company

question 92

Multiple Choice

What is the effect on net income if a company fails to record a purchase in transit (FOB shipping point) and also fails to include the purchase in physical inventory?

• A)Income is overstated.
• B)Income is understated.
• C)Income is correct.
• D)Not enough information is provided to determine the answer.

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Definitions:

Simplify

To alter a complex equation or expression into a simpler form that retains the original meaning or value.

Like Terms

Terms in an algebraic expression that have the same variable raised to the same power and can be combined.

Evaluate

To determine the value of an expression by computing its numerical value.

Calculate

Perform mathematical operations to find a numerical answer.