Ending inventory is incorrectly calculated in the current year.It is accurately calculated at the end of the next year.The error in the ending inventory in the current year:
A)affects only income statement accounts.
B)affects only balance sheet accounts.
C)can be ignored since it will self-correct.
D)is a self-correcting error.

Question

Quizplus · Accepted Answer

An error in ending inventory impacts the inventory reported on the balance sheet and the cost of goods sold and net income reported on the income statement.The ending inventory for the current period becomes the beginning inventory for the next period.Over the two years,these errors offset one another.As a result,inventory errors will "self-correct" (but only if ending inventory is accurately calculated at the end of the following year and adjusted to that correct balance).

Ending Inventory Is Incorrectly Calculated in the Current Year