Happy House Corporation reported net income of $425,000 for the current year. After the financial statements had been prepared, it was discovered that ending inventory had been overstated by $25,000. The correct net income was:

Question

Quizplus · Accepted Answer

The ending inventory was overstated, which means that the cost of goods sold was understated by the same amount ($25,000). This means that the correct net income would be $400,000 ($425,000 - $25,000). Therefore, the correct answer is choice C.

Happy House Corporation Reported Net Income of $425,000 for the Current