If the ending inventory is overstated for any reason, net income will also be overstated.

Name: If the ending inventory is overstated for any reason, net income will also be overstated.
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Question

Quizplus · Accepted Answer

Ending inventory is subtracted from cost of goods sold to determine gross profit, and then other expenses are subtracted from gross profit to determine net income. If ending inventory is overstated, cost of goods sold will be understated, and therefore gross profit and net income will be overstated.

If the Ending Inventory Is Overstated for Any Reason, Net