An overstatement of ending inventory in one period results in
A) no effect on proﬁt of the next period.
B) an overstatement of proﬁt of the next period.
C) an understatement of proﬁt 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 profit for that period. Consequently, in the next period, this overstatement will reverse when the inventory is corrected, leading to an understatement of profit for the next period.

An Overstatement of Ending Inventory in One Period Results in