If a Company Understates Its Ending Inventory Balance for 2012

question 74

Multiple Choice

If a company understates its ending inventory balance for 2012 by $15,500,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 $15,500 Understated by $15,500
• B)Understated by $15,500 Overstated by $15,500
• C)Understated by $15,500 No effect
• D)Overstated by $15,500 No effect

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Definitions:

Necessary and Proper Clause

A provision in the U.S. Constitution granting Congress the power to pass all laws deemed necessary and proper for executing its enumerated powers.

Equal Representation

The principle of giving each group or jurisdiction, regardless of size or population, the same number of representatives in a legislative or decision-making body.

Dual Federalism

A political arrangement in which state governments and the federal government each have defined, but separate, powers and responsibilities.

Reform Period

A time frame in which significant changes are made to social, political, or economic institutions and practices.