Items That Were Incorrectly Omitted from 2013 Credit Purchases, but Correctly

question 26

Multiple Choice

Items that were incorrectly omitted from 2013 credit purchases, but correctly included in the 2013 ending inventory would have the following 2013 effects:

• A) overstate pre-tax income but have no effect on current liabilities.
• B) overstate pre-tax income and understate liabilities.
• C) cancel out with no effect on pre-tax income but would understate current liabilities.
• D) understate pre-tax income but have no effect on liabilities.

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Definitions:

Trade-off

The compromise between two desirable but mutually exclusive outcomes in decision-making.

Opportunity Costs

The expense incurred from not choosing the next most advantageous option during decision-making.

Direct Costs

Costs that can be directly attributed to the production of a specific good or service, such as raw materials and labor.

Marginal Analysis

Evaluation of the extra benefits derived from an activity versus the extra costs it incurs.