The CPA Firm Auditing Capri Corporation Found That Net Income

question 140

Multiple Choice

The CPA firm auditing Capri Corporation found that net income had been overstated.Which of the following could be the cause?

• A)Failure to take advantage of purchase discounts by paying within the discount period.
• B)Overstatement of inventory at year-end.
• C)Use of the last-in,first-out (LIFO)method of valuing inventory in a period of rising prices.
• D)Failure to record payment of an account payable to a supplier on the last day of the year.

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Definitions:

Short Term Financing

Financing obtained for a time period of up to one year, used to fund immediate operational needs such as inventory purchase or payroll.

Bankers Acceptances

A short-term debt instrument issued by a company that is guaranteed by a commercial bank, often used in international trade.

Inventory Loan

A loan taken by a company to purchase inventory, where the inventory itself often serves as collateral for the loan.

Carrying Costs

Expenses incurred by a company for holding inventory over a period of time, including costs associated with warehousing and maintaining goods.