An error in the physical count of goods on hand at the end of a period resulted in a $15,000 overstatement of the ending inventory.The effect of this error in the current period is

Question

Quizplus · Accepted Answer

The overstatement of ending inventory will lead to an overstatement of current period net income by $15,000. To correct for this error, the ending inventory balance needs to be reduced by $15,000, which will result in a decrease of current period net income by the same amount. Choice A is incorrect because it would result in an understatement of current period net income. Choice B is incorrect because it would not correct for the error and would result in an overstatement of current period net income. Choice D is incorrect because it would not correct for the error and would not affect current period net income.

An Error in the Physical Count of Goods on Hand