In the Following Questions, Inventory Errors Are Noted for 2009

question 87

Essay

In the following questions, inventory errors are noted for 2009. Assume that the errors are not discovered until 2010, and that the company uses a periodic inventory system. Indicate the effect of the error, if any, on the accounts noted in the columns, using the following code:
U = understated; O = Overstated; NE = No effect

- $$\begin{array} { | l | l | l | } \hline { \text { Error } } & \text { Cost of goods sold } & \text { Retained earnings } \\\hline \begin{array} { l } \text { Recorded purchases for } \$ 523,000 \text { that } \\\text { should have been } \$ 532,000 .\end{array} & & \\\hline\end{array}$$

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Definitions:

Empirical Claims

Claims that can be true or false depending on the facts.

Prove

To demonstrate the truth or existence of something through evidence or argument.

Confirmation Bias

The tendency to search for, interpret, and remember information in a way that confirms one's preconceptions.

Hypothesis

A proposed explanation made on the basis of limited evidence as a starting point for further investigation.