An Employee Accidentally Overstated the Year's Advertising Expense by $50,000

question 30

Multiple Choice

An employee accidentally overstated the year's advertising expense by $50,000. Which of the following correctly depicts the effect of this error?

• A) Cost of goods manufactured will be overstated by $50,000.
• B) Cost of goods sold will be overstated by $50,000.
• C) Both cost of goods manufactured and cost of goods sold will be overstated by $50,000.
• D) Cost of goods sold will be overstated by $50,000, and cost of goods manufactured will be understated by $50,000.
• E) None of the other answers are correct.

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Definitions:

Equivalent Effective Rate

A comparable interest rate that equates the interest earned on different investments or loans over the same time period, taking into account the effects of compounding.

Face Value

The original value of a financial instrument as stated on the instrument itself, without accounting for interest or market value fluctuations.

Simple Interest

Interest calculated only on the principal amount, or on that portion of the principal amount which remains unpaid.

Compounded Monthly

An approach to interest calculation conducted every month, including both the initially loaned or deposited sum and the cumulatively gained interest from former periods.