Under the periodic inventory method, if an inventory purchase has been made and recorded but has NOT yet arrived (and thus is not counted), the financial statements will

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Under the periodic inventory method, inventory purchases are not recorded as an expense until the end of the accounting period. If a purchase has been made but has not yet arrived and thus not counted, the inventory account will be understated since it doesn't include the amount of the purchase. This will lead to an understatement of the cost of goods sold and ultimately an understatement of net income. Therefore, the correct answer is option C, which states that financial statements will understate net income.

Under the Periodic Inventory Method, If an Inventory Purchase Has