On December 31 (End of the Accounting Period) a Company

question 139

Multiple Choice

On December 31 (end of the accounting period) a company completed an inventory count and included some merchandise that had been received but was not unpacked. No purchase had been recorded. The error causes an:

• A) understatement of inventory, purchases, and accounts payable.
• B) understatement of both income and assets by the same amount.
• C) overstatement of income and understatement of accounts payable.
• D) overstatement of inventory, purchases, and accounts payable.

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Definitions:

Comparative Advantage

The ability of a country or individual to produce a particular good or service at a lower opportunity cost than its trade partners.

Heckscher-Ohlin Theorem

A theory that explains the existence of a country’s comparative advantage by its factor endowments: A country has a comparative advantage in the production of a product if that country is relatively well endowed with inputs used intensively in the production of that product.

Resource Allocation

The process of assigning and managing assets in a manner that supports an organization's strategic goals.

Resource Constraints

Limitations on the availability of resources, which can restrict output, growth, and efficiency.