Ricardo Clothing Uses a Periodic Inventory System and Committed an Error

question 1

Multiple Choice

Ricardo Clothing uses a periodic inventory system and committed an error that overstated inventory at the end of Year One. Assuming no further errors occur during the following year, at the end of Year Two:

• A) profit is understated; equity is overstated.
• B) profit is understated; equity is correct.
• C) profit is overstated; equity is correct.
• D) profit is overstated; equity is overstated.

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Definitions:

Wetlands

Areas where water covers the soil, either year-round or for varying periods of time throughout the year, including marshes, swamps, and bogs, important for biodiversity and flood control.

Greenhouse Gas Emissions

The release of gases like carbon dioxide and methane into the atmosphere, which trap heat and contribute to global warming and climate change.

Productive Ecosystems

Ecosystems characterized by high levels of primary productivity, capable of supporting diverse species through abundant resources.

Overfishing

The practice of fishing at rates too high for fish populations to naturally replenish, leading to a depletion of the species.