If ending inventory is overstated for the current period due to a costing error but purchases are correct, the balance sheet at the end of the succeeding year would be correctly stated.

Question

Quizplus · Accepted Answer

The error in ending inventory will self-correct in the succeeding year as the overstated ending inventory becomes the beginning inventory for the next period, affecting cost of goods sold and net income, but the balance sheet will be correct by the end of the succeeding year.

If Ending Inventory Is Overstated for the Current Period Due