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) Cost of Goods Sold to be overstated.

Question

Quizplus · Accepted Answer

When ending inventory is understated, assets are understated because inventory is an asset. Additionally, Cost of Goods Sold is overstated, leading to understated net income.

The Ending Merchandise Inventory Was Understated