An employee accidentally overstated the year's advertising expense by $50,000. Which of the following correctly depicts the effect of this error?
A) Cost of goods manufactured will be overstated by $50,000.
B) Cost of goods sold will be overstated by $50,000.
C) Both cost of goods manufactured and cost of goods sold will be overstated by $50,000.
D) Cost of goods sold will be overstated by $50,000, and cost of goods manufactured will be understated by $50,000.
E) None of the other answers are correct.

Question

Quizplus · Accepted Answer

Advertising expense is a period cost and does not affect the cost of goods manufactured or cost of goods sold. Therefore, none of the other answers are correct.

An Employee Accidentally Overstated the Year's Advertising Expense by $50,000