If a Company Overstates Its Ending Inventory Balance for 2012

question 107

Multiple Choice

If a company overstates its ending inventory balance for 2012 by $10,000,and overstates its ending inventory balance for 2011 by $5,000 what are the effects on its net income for 2012 and 2011? Effect on 2012 Net Income Effect on 2011 Net Income

• A)Overstated by $15,000 Overstated by $10,000
• B)Understated by $5,000 Overstated by $10,000
• C)Overstated by $5,000 Overstated by $5,000
• D)Overstated by $10,000 Overstated by $5,000

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Definitions:

Freudian Perspective

A psychological view based on Sigmund Freud's theories that focus on unconscious processes and childhood experiences affecting behavior.

Topographic Model

A Freudian psychological theory illustrating the conscious, preconscious, and unconscious layers of the mind.

Primary Process Thinking

A Freudian term describing the irrational and associative nature of the unconscious mind, often manifested in dreams.

Secondary Process Thinking

A rational, conscious thought process aimed at problem-solving, based on reality principle, in psychoanalytic theory.