Zeus Company Understated Its Ending Inventory

question 84

Multiple Choice

Zeus Company understated its ending inventory. Which of the following answers correctly states the effect of the error in the present period?

• A)Overstatement of total assets and cost of goods sold.
• B)Understatement of total assets and gross margin.
• C)Understatement of liabilities and retained earnings.
• D)Overstatement of cost of goods sold and retained earnings.

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Definitions:

Compounded Monthly

Interest calculation method where interest is added to the principal balance each month, and future interest accrues on the total amount.

Principal Balance

The outstanding amount of a loan or debt not including interest or other charges.

Amortization Schedule

A table detailing each periodic payment on an amortizing loan, breaking down the amounts going toward principal and interest.

Compounded Semi-annually

An interest calculation method where interest is added to the principal balance of an investment or loan twice a year, resulting in interest on interest.