An understatement of ending inventory will result in a credit to Future Income Taxes.

Question

Quizplus · Accepted Answer

An understatement of ending inventory typically results in an overstatement of the cost of goods sold, which decreases net income before taxes in the current period. Future income taxes are affected by differences between accounting income and taxable income, but an understatement of ending inventory does not directly result in a credit to future income taxes.

An Understatement of Ending Inventory Will Result in a Credit