The accountant for Suzanne Company made the following errors related to inventory in 2020: 1. The beginning inventory for 2020 was overstated by $1,375 due to an error in the physical count. 2. A $1,650 purchase of merchandise on credit in 2020 was not recorded or included in the ending inventory. Assuming a periodic inventory system, how would Sue's cost of goods sold, gross profit, and net income be affected in 2020 by these errors? Set Cost of Goods Sold Gross Profit Net Income I. Overstated Understated Understated II. Overstated Understated No effect III. Understated Overstated Overstated IV. No effect No effect No effect a. Set I b. Set II c. Set III d. Set IV
The accountant for Suzanne Company made the following errors related to inventory in 2020: 1. The beginning inventory for 2020 was overstated by $1,375 due to an error in the physical count. 2. A $1,650 purchase of merchandise on credit in 2020 was not recorded or included in the ending inventory. Assuming a periodic inventory system, how would Sue's cost of goods sold, gross profit, and net income be affected in 2020 by these errors? Set Cost of Goods Sold Gross Profit Net Income I. Overstated Understated Understated II. Overstated Understated No effect III. Understated Overstated Overstated IV. No effect No effect No effect a. Set I b. Set II c. Set III d. Set IV
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
The accountant for Suzanne Company made the following errors related to inventory in 2020:
|
1. |
The beginning inventory for 2020 was overstated by $1,375 due to an error in the physical count. |
|
2. |
A $1,650 purchase of merchandise on credit in 2020 was not recorded or included in the ending inventory. |
Assuming a periodic inventory system, how would Sue's cost of goods sold, gross profit, and net income be affected in 2020 by these errors?
|
Set |
Cost of Goods Sold |
Gross Profit |
Net Income |
|
I. |
Overstated |
Understated |
Understated |
|
II. |
Overstated |
Understated |
No effect |
|
III. |
Understated |
Overstated |
Overstated |
|
IV. |
No effect |
No effect |
No effect |
|
|
a. |
Set I |
|
|
b. |
Set II |
|
|
c. |
Set III |
|
|
d. |
Set IV |
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