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4. All else being equal, what is the overall effect on net income and the accounting equation when inventory is written down? A. B. C. D. E. Net Income No effect Decrease Decrease No effect Decrease Total Assets No effect No effect Decrease Decrease Decrease Total Liabilities No effect No effect No effect No effect Decrease Total Owners' Equity No effect No effect Decrease Decrease Decrease 5. When applying the LCM method, the term market value reflects the amount the company could sell the inventory for in the ordinary course of business. A. True B. False 6. On 12/31/2020, Goodson Corp. understated a purchase of inventory on account. Rather than recording the inventory purchase for $60,000, it recorded the amount as $40,000 in both the Inventory and Accounts Payable accounts. Goodson Corp. will not pay for this inventory until early in 2021. Goodson's cost of ending inventory per its physical inventory count at the end of 2020 was correct. As a result of this inventory purchase error, which of the following statements is true? A. Goodson's cost of goods for 2020 is overstated by $20,000, and its net income is overstated by $20,000. B. Goodson's cost of goods for 2020 is overstated by $20,000, and its net income is understated by $20,000. C. Goodson's cost of goods for 2020 is understated by $20,000, and its net income is understated by $20,000. D. Goodson's cost of goods for 2020 is understated by $20,000, and its net income is overstated by $20,000. E. Goodson's cost of goods sold is correctly stated, but its net income is overstated by $20,000. F. Goodson's cost of goods sold is correctly stated, but its net income is understated by $20,000. G. Both Goodson's cost of goods sold and net income are correctly stated for 2020. 7. Assume a company's cost of goods sold is overstated by $500,000 due to an inventory error and it has an income tax rate of 25%. All else being equal, what is the net income effect of this error when taking into account income taxes? A. Net income is understated by $500,000. B. Net income is overstated by $500,000. C. Net income is understated by $125,000. D. Net income is overstated by $125,000. E. Net income is understated by $375,000. F. Net Income is overstated by $375,000

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