Your client performed the physical count of inventory as of November 30,one month prior to year-end.Subsequently,your client closed the sales journal on 12/29/XX,two days before year-end,and reported those two days' credit sales in January of the next year.Assuming the client uses a perpetual inventory system,which of the following is most likely to be overstated relating to the year XX financial statements?
A)Sales.
B)Cash.
C)Inventory.
D)Accounts receivable.

Question

Quizplus · Accepted Answer

Since the physical count was performed one month prior to year-end, any changes to the inventory during that month are not reflected in the inventory balance at year-end. Therefore, the inventory balance reported on the financial statements is likely to be overstated. The timing of the credit sales is not relevant to the inventory balance, and neither is cash or accounts receivable.

Your Client Performed the Physical Count of Inventory as of November