Shaman Inc.'s income statement includes sales revenue $117,000, cost of goods sold $72,000, and gross profit $45,000. If ending inventory was accidentally overstated by $5,000, what is the correct amount for gross profit?
A) $40,000
B) $45,000
C) $50,000
D) $55,000
A) $40,000
Explanation: if ending inventory is overstated, then so is gross profit by same amount. Ex: ending inventory overstated by $5,000, so gross profit of $45,000 - $5,000 overstatement = correct gross profit $40,000.
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