Bella Ltd. is a calendar-year corporation. Bella uses a periodic inventory system. Its financial statements for
2017 contained errors as follows:

-By how much will net income for 2017 be over or understated?

Question

Bella Ltd. is a calendar-year corporation. Bella uses a periodic inventory system. Its financial statements for
2017 contained errors as follows:
 
-By how much will net income for 2017 be over or understated?

Quizplus · Accepted Answer

The error in recording the purchase of inventory for $6,000 as an expense in 2017 will cause an understatement of ending inventory and an overstatement of cost of goods sold. This will result in an overstatement of expenses and an understatement of net income by $6,000.

Bella Ltd Is a Calendar-Year Corporation