The ending merchandise inventory was understated. This error would cause
A) assets to be understated.
B) assets to be overstated.
C) net income to be overstated.
D) None of these are correct.

Question

Quizplus · Accepted Answer

A lower ending merchandise inventory means that the cost of goods sold is higher, resulting in a lower net income and lower assets (specifically inventory). Therefore, if the ending merchandise inventory is understated, it would result in assets being understated as well.

The Ending Merchandise Inventory Was Understated