Ending inventory for the year ended December 31, 2008, is understated. How will this error affect net income for 2008 and 2009?

Question

Quizplus · Accepted Answer

An understated ending inventory in 2008 will cause the cost of goods sold to be overstated, leading to an understated net income for 2008. In 2009, the beginning inventory will be understated, causing the cost of goods sold to be understated, which results in an overstated net income for 2009.

Ending Inventory for the Year Ended December 31, 2008, Is