Reported income for CXC was incorrect due to two errors.One error was the overstatement of ending inventory by $2,000.Which of the following errors, in combination with the inventory error, could cause income to be overstated by $2,500?

Question

Quizplus · Accepted Answer

When ending inventory is overstated by $2,000, it causes income to be overstated because the cost of goods sold (COGS) is understated. If beginning inventory was understated by $500, it would further reduce COGS, thus overstating income by an additional $500. Together, these errors would cause income to be overstated by $2,500.

Reported Income for CXC Was Incorrect Due to Two Errors