Question

1) An overstatement of the beginning inventory results in

Group of answer choices

a need to adjust purchases.

an overstatement of net income.

an understatement of net income.

no effect on the period’s net income.

2) Under FOB destination, what is a journal entry of Seller for freight charges

Group of answer choices

Debit to Freight-in expense

3) An overstatement of ending inventory in one period results in

Group of answer choices

an understatement of net income of the next period.

an overstatement of the ending inventory of the next period.

an overstatement of net income of the next period.

no effect on net income of the next period.

Debit to Allowance to reduce inventory

Debit to Inventory

Debit to Freight-Out expense

Answer 1

1) An overstatement of beginning inventory results in overstatement of cost of goods sold .So , the gross profit decreases ,eventually net income also decreases

UNDERSTATEMENT OF NET INCOME

2) In FOB destination , seller retains the leagal title ,for the goods sold , until the goods reach the buyer's location and seller pays the charges . So , for shipping charges, there is a debit to freight out expense and credit to cash

DEBIT TO FREIGHT OUT EXPENSE

3) Ending inventory is overstated , so next period beginning inventory is also overstated . cost of goods sold is also overstated and so gross profit and net profit decreases.

UNDERSTATEMENT OF NET INCOME OF NEXT PERIOD.