Match each situation to its impact (a-c) on the current year's net income.
-The beginning inventory was recorded as $10,000, when actual inventory on hand was $12,000.
A)Net income for the current year will be overstated.
B)Net income for the current year will be understated.
C)There will be no error effect on net income.

Question

Quizplus · Accepted Answer

Since the beginning inventory was recorded as $10,000 instead of the actual $12,000, the cost of goods sold will be understated and the gross profit will be overstated. This overstatement of gross profit will lead to an overstatement of net income.

Match Each Situation to Its Impact (A-C) on the Current