A Department Store Had Items in Its Inventory at the End

question 75

Multiple Choice

A department store had items in its inventory at the end of the year that had a recorded book value of $10,000 and, because of fashion changes, a market value of only $7,000.The department store failed to write down these inventory items to market value.To keep the obsolete condition of the inventory items away from its auditors, the firm shipped the goods to a remote warehouse.The effect of this error was to

• A)understate the inventory turnover ratio.
• B)overstate the cost of goods sold to sales percentage.
• C)overstate the total assets turnover ratio.
• D)understate net income.
• E)none of the above

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Definitions:

Exporting Products

The act of selling goods and services produced in one country to other countries.

Ethical Concerns

Issues or situations that raise questions about what is morally right or wrong, requiring careful consideration and judgement.

Financial Resources

Assets in the form of money or other valuables that an individual or organization can utilize to carry out its functions or objectives.

Labour Costs

The total sum of all compensation that a business must pay to its employees for a set period or on a given project.