When the current year's ending inventory amount is overstated,the
A) current year's cost of goods sold is overstated.
B) current year's total assets are understated.
C) current year's net income is overstated.
D) next year's income is overstated.

Question

Quizplus · Accepted Answer

When the ending inventory is overstated, the cost of goods sold (COGS) is understated because COGS is calculated as Beginning Inventory + Purchases - Ending Inventory. This understatement of COGS leads to an overstatement of net income, as less expense is deducted from revenue.

When the Current Year's Ending Inventory Amount Is Overstated,the