O-LevelAccountingAccounting principles and policies7707/11 · May/June 2022 · Q211 Mark
When preparing his financial statements, a trader valued his inventory at cost. He then found that 10 units of inventory, costing $12 per unit, were damaged. If he spent $2 per unit on repairs, he could sell them for $9 each. What was the effect on the income statement of the incorrect inventory valuation? gross profit profit for the year
Agross profit: overstated $30, profit for the year: no effect
Bgross profit: overstated $50, profit for the year: overstated $50
Cgross profit: understated $30, profit for the year: no effect
Dgross profit: understated $50, profit for the year: understated $50
✓ Correct answer
B: gross profit: overstated $50, profit for the year: overstated $50
Practise more questions on this topic
Oracle Prep sorts past-paper questions by topic, so you can drill Accounting principles and policies and see which topics are most likely to come up next.
Sign up free →