If Purchases Are Recorded Correctly but Ending Physical Inventory Is

question 16

Multiple Choice

If purchases are recorded correctly but ending physical inventory is understated, which one of the following situations occurs for the current year?

• A)Working capital is understated and net income is overstated.
• B)Working capital and net income are understated.
• C)Working capital is overstated and net income is understated.
• D)Working capital and net income are overstated.

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Definitions:

Compensation

The complete sum of financial and non-financial compensation given to a worker by their employer in exchange for the work done.

Broadbanding

A method of salary structure that consolidates a large number of pay grades into fewer, wider bands.

Hybrid Wage System

A compensation strategy that combines elements of both hourly wages and salary, potentially including performance bonuses or commissions.

Administrative Employees

Employees who are responsible for office functions and tasks; they typically engage in non-manual work related to the general business operations of an organization.