Trent Department Store uses a perpetual inventory sys- tem but adjusts its inventory records at year-end to reflect the results of a complete physical inventory. In the physi- cal inventory taken at the ends of 2010 and 2011, Trent’s employees failed to count the merchandise in the store’s window displays. The cost of this merchandise amounted to $13,000 at the end of 2010 and $19,000 at the end of 2011. As a result of these errors, the cost of goods sold for 2011 will be: a. Understated by $19,000. b. Overstated by $6,000. c. Understated by $6,000. d. None of the above.
Trent Department Store uses a perpetual inventory sys- tem but adjusts its inventory records at year-end to reflect the results of a complete physical inventory. In the physi- cal inventory taken at the ends of 2010 and 2011, Trent’s employees failed to count the merchandise in the store’s window displays. The cost of this merchandise amounted to $13,000 at the end of 2010 and $19,000 at the end of 2011. As a result of these errors, the cost of goods sold for 2011 will be: a. Understated by $19,000. b. Overstated by $6,000. c. Understated by $6,000. d. None of the above.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Trent Department Store uses a perpetual inventory sys- tem but adjusts its inventory records at year-end to reflect the results of a complete physical inventory. In the physi- cal inventory taken at the ends of 2010 and 2011, Trent’s employees failed to count the merchandise in the store’s window displays. The cost of this merchandise amounted to
$13,000 at the end of 2010 and $19,000 at the end of 2011. As a result of these errors, the cost of goods sold for 2011 will be:
a. Understated by $19,000.
b. Overstated by $6,000.
c. Understated by $6,000.
d. None of the above.
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