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33.          In taking a physical inventory at the end of year 2011, Nadir Company forgot to count certain units. Indicate how this error affects the following:

(a)          2011 cost of goods sold.               

a)            Overstates 2011 cost of goods sold.

b)            Understates 2011 cost of goods sold.

c)            None of the above

 

(b)          2011 gross profit.            

a)            Understates 2011 gross profit.

b)            Overstates 2011 gross profit.

c)            None of the above.

 

(c)           2011 net income.            

a)            Understates 2011 net income.

b)            Overstates 2011 net income.

c)            None of the above.

 

(d)          2012 net income.            

a)            Understates 2012 net income.

b)            Overstates 2012 net income.

c)            None of the above.

 

 

(e)          The combined two-year income.

a)            The understated 2012 net income and the overstated 2011 net income combine to yield a correct total income for the two-year period.

b)            The understated 2011 net income and the overstated 2012 net income combine to yield a correct total income for the two-year period.

 

(f)           Income for years after 2012.

a)            The 2011 error will not affect years after 2012.

b)            The 2011 error will affect years after 2012.

 

 

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