US accounting Question

Question

If net purchase are overstated by $1,000 and ending inventory is overstated by $4,000, then net income is:

a. overstated by $5,000
b. overstated by $3,000
c. overstated by $1,000
d. understated by $4,000

Answer 1

如果一年多purchase 的話，會令個profit 細咗
net income 細咗

所以， If net purchase are overstated by $1,000，會令net income understated 1000

也由於，
Cost of good sold =open inventory + Purchases - closing stock
closing stock 計多咗
會令cost of good sold多咗

Sales - cost of good slod -expenses = Net profit /income

所以ending inventory is overstated by $4,000,會令net incomeoverstated 4000

因此，答案為
b. overstated by $3,000