On February 17, 2011, Fernandes Company purchases inventory and pays $740,000 fo

Question

On February 17, 2011, Fernandes Company purchases inventory and pays $740,000 for the entire purchase. However, Fernandes does not record the purchase transaction and does not count half of the purchased inventory in ending inventory. The applicable tax rate for Fernandes is 35 percent. Assuming that no correcting entries and no other errors were made, these errors will cause the 2012 net income to be

a. Overstated by $129,500

b. Understated by $240,500

c. Understated by $370,000

d. Overstated by $240,500

a. Overstated by $129,500

b. Understated by $240,500

c. Understated by $370,000

d. Overstated by $240,500

Explanation / Answer

On February 17, 2011, Fernandes Company purchases inventory and pays $740,000 fo

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.