If a Company Understates Its Ending Balance of Inventory in Year

question 134

Multiple Choice

If a company understates its ending balance of inventory in year 1 and it records inventory correctly in year 2,which one of the following is true?

• A)Net income is overstated in year 1.
• B)Cost of goods sold is overstated in year 2.
• C)Net income is understated in year 2.
• D)Retained earnings is understated in year 2.

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Definitions:

Manufacturing-Based Quality

A perspective on quality that focuses on adherence to standards and specifications during the manufacturing process.

Assurance

In customer service, it refers to the confidence and trustworthiness demonstrated by a service provider, reassuring customers about the quality of the service or product.

Texas A&M

A public research university in College Station, Texas, known for its strong emphasis on agriculture, engineering, and military science.

L.L. Bean, Inc.

An American retailer recognized for its outdoor recreation merchandise and clothing, known for its customer service and satisfaction guarantee.