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Viktor [21]
3 years ago
12

2014 ending inventory was overstated by $25,000, but it was too late to correct the financial statements. Which of the following

describes the effect of the inventory error on the 2014 financial statements?A. Net income and stockholders' equity are both understated.
B. Net income is understated and stockholders' equity is correct.
C. Net income and stockholders' equity are both overstated.
D. Net income and stockholders' equity are both unaffected.
Business
1 answer:
expeople1 [14]3 years ago
4 0

Answer:

C. Net income and stockholders' equity are both overstated.

Explanation:

In the income statement , ending inventory is deducted from the addition of the beginning inventory and net purchases to arrive at the cost of goods sold. Therefore, the cost of goods can be stated as an equation stated as follows:

Cost of goods sold = Beginning inventory + Net purchases - Ending inventory

From the above equation, it can be observed that if the ending inventory is overstated, cost of goods sold will be understated by that amount.

Since gross income is determined by deducting cost of goods sold from the net sales, an understated cost of goods sold will result in an overstated gross income and subsequently overstated net income.

Since net income is one of the components of the stockholders' equity, an overstated net income will leads to an overstated stockholders' equity.

Therefore, the correct option is C. Net income and stockholders' equity are both overstated.

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Answer:

-1 to +1

Explanation:

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-1 shows that there is perfect negative correlation.

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Positive correlation shows that with the increase of let's say X, there would also be increase of Y. They would positively move together

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A customer has invested a total of $10,000 in a nonqualified deferred annuity through a payroll deduction plan offered by the sc
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Answer:

On $6000 amount customer be taxed

Explanation:

given data

total invest = $10000

current value = $16000

to find out

On what amount customer be taxed

solution

we know customer is invest here total $10000 and

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so we can say that here payment non qualified deferred, annuity  after tax

so tax are paid of earning

so earning =  current value - invest

earning = 16000 - 10000

earning = $6000

so on $6000 amount customer be taxed

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