In 2015,beginning inventory is overstated.What is the effect of the error on total stockholders' equity in 2016?

Question

Quizplus · Accepted Answer

The overstatement of beginning inventory in 2015 will cause an overstatement of cost of goods sold and an understatement of net income in 2015. However, this error will self-correct in 2016 as the ending inventory in 2015 becomes the beginning inventory in 2016, thus having no effect on total stockholders' equity in 2016.

In 2015,beginning Inventory Is Overstated