Entole Company Began Operations in 2014

question 9

Multiple Choice

Entole Company began operations in 2014.During the first two years of operations,Entole made undiscovered errors in taking its year-end inventories that overstated 2014 ending inventory by $50,000 and understated 2015 ending inventory by $40,000.The combined effect of these errors on reported income is 2014 2015 2016

• A) understated $50,000 overstated $90,000 understated $40,000
• B) overstated $50,000 understated $90,000 not affected
• C) overstated $50,000 understated $40,000 not affected
• D) overstated $50,000 understated $90,000 overstated $40,000

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Definitions:

Interest Rates

The rate at which a borrower pays interest to a lender for borrowing money.

Coupon Payments

Regular interest payments made to bondholders during the lifetime of the bond.

Floating Rate Bonds

Bonds with interest rates that adjust periodically based on a reference rate.

Coupon Rate

The interest rate stated on a bond or other fixed-income security, expressed as a percentage of its face value, that the issuer pays to the bondholder annually.