3 If the ending inventory in Year 1 is understated, gross profit for Year 1 is: not affected. overstated. understated. determined by beginning inventory. QUESTION 4 When an owner combines their personal assets with the assets of their business, what concept or principle of accounting is being violated? Business entity Going concern Cost Objectivity QUESTION 5 Applying LCM to the items that make up ending inventory is an application of which of the following concepts? Consistency Full disclosure Conservatism Materiality