If a Firm Produces More Goods Than It Sells and Buys

Multiple Choice

If a firm produces more goods than it sells and buys more raw materials than it uses up during the year, an inventory adjustment must be made so as not to:

A) overstate earnings for the year.
B) understate earnings for the year.
C) overstate liabilities at the end of the year.
D) understate liabilities at the end of the year.
E) overstate assets at the end of the year.