A $25,000 Overstatement of the 2016 Ending Inventory Was Discovered

question 52

Multiple Choice

A $25,000 overstatement of the 2016 ending inventory was discovered after the financial statements for 2016 were prepared. Which of the following describes the effect of the inventory error on the 2016 financial statements?

• A)Current assets were overstated and net income was understated.
• B)Current assets were understated and net income was understated.
• C)Current assets were overstated and net income was overstated.
• D)Current assets were understated and net income was overstateD.An overstatement of ending inventory overstates current assets and understates cost of goods sold and therefore overstates net income.

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Definitions:

Busy Signal

A repeating tone or signal on a phone line indicating that the line is currently engaged in another call and unavailable.

Implicit

Information or knowledge that is understood or learned without being overtly expressed or declared.

Visual Sketchpad

A component of working memory responsible for holding and manipulating visual and spatial information.

Working Memory

A cognitive system responsible for temporarily holding information available for processing, essential for reasoning and the guidance of decision-making and behavior.