An employee accidentally overstated the year's advertising expense by $50,000. Which of the following correctly depicts the effect of this error?
A) Cost of goods manufactured will be overstated by $50,000.
B) Cost of goods sold will be overstated by $50,000.
C) Both cost of goods manufactured and cost of goods sold will be overstated by $50,000.
D) Cost of goods sold will be overstated by $50,000, and cost of goods manufactured will be understated by $50,000.
E) None of the answers is correct.

Question

Quizplus · Accepted Answer

Advertising expense is an operating expense, not directly related to the cost of goods manufactured or the cost of goods sold. Therefore, overstating advertising expense does not affect the cost of goods manufactured or sold.

An Employee Accidentally Overstated the Year's Advertising Expense by $50,000