After Issuing Its Financial Statements, a Company Discovered That Its

question 30

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.If beginning inventory is overstated, COGS is overstated and net income is understated: $100,000 (1 30%) = $70,000.

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Definitions:

American Society

The social structure, culture, and community life of the United States.

Individualism

A social theory favoring freedom of action for individuals over collective or state control.

Majority Rule

A principle in decision-making processes where the option that receives more than half of the votes prevails.

Early Twentieth Century

A period ranging from the year 1901 to 1940, characterized by significant technological, political, and cultural changes.