Assume that a purchase invoice for $1,000 was appropriately recorded in fiscal 2012, but the inventory was excluded in error during the ending inventory count. What impact will this have on fiscal 2013 financial reporting?
A)Gross margin is understated by $1,000.
B)Cost of goods available for sale is understated by $1,000.
C)Cost of sales is overstated by $1,000.
D)Beginning inventory is overstated by $1,000.

Question

Quizplus · Accepted Answer

Since the inventory was excluded in error during the ending inventory count, the cost of goods available for sale will be understated by $1,000. Therefore, this will impact the calculation of cost of goods sold in fiscal 2013, resulting in an understatement of gross margin by the same amount. However, the beginning inventory of fiscal 2013 will not be impacted by this error.

Assume That a Purchase Invoice for $1,000 Was Appropriately Recorded