After issuing its financial statements, a company discovered that its beginning inventory was overstated by $100,000. Its tax rate is 30%. As a result of this error, net income was:
A) Understated by $70,000.
B) Overstated by $70,000.
C) Understated by $30,000.
D) Overstated by $30,000.

Question

Quizplus · Accepted Answer

If beginning inventory is overstated, COGS is overstated and net income is understated: $100,000 × (1 - 30%) = $70,000.

After Issuing Its Financial Statements, a Company Discovered That Its