Upaway Company hired some students to help count inventory during their semester break. Unfortunately, the students added incorrectly and ending inventory was overstated by $12,000. What would be the effect of this error in ending inventory?
A) Cost of goods sold would be overstated.
B) Ending retained earnings would be understated.
C) Profit would be overstated.
D) Profit would be understated.

Question

Quizplus · Accepted Answer

Overstating the ending inventory will decrease the cost of goods sold and increase the gross profit, leading to an overstatement of profit.

Upaway Company Hired Some Students to Help Count Inventory During