An overstatement of ending inventory in one period results in
A)no effect on net income of the next period.
B)an overstatement of net income of the next period.
C)an understatement of net income of the next period.
D)an overstatement of the ending inventory of the next period.

Question

Quizplus · Accepted Answer

An overstatement of ending inventory in one period results in an understatement of cost of goods sold, leading to an overstatement of net income for that period. Consequently, in the next period, this overstatement of ending inventory becomes an overstatement of the beginning inventory, which will increase the cost of goods sold, thereby understating net income for the next period.

An Overstatement of Ending Inventory in One Period Results in