Final answer:
When accounts payable-related liabilities are understated, it often results in overstated purchases and inventory because these expenses have not been recorded properly.
Step-by-step explanation:
When accounts payable-related liabilities are understated in financial statements, it typically means that the expenses (and therefore the liabilities) have not been recorded correctly. As a result, this underreporting of liabilities often leads to an overstatement of net income and assets, such as inventory, because the costs that should have been recorded have not been accounted for. Purchases would also be understated because the transactions that should have been recorded as an increase in inventory and a corresponding increase in accounts payable have been omitted.
The correct answer to the question is: When accounts payable-related liabilities are understated, purchases and inventory are often a) overstated.