An overstatement of the 2011 ending inventory results in an overstatement of stockholders' equity as of the end of 2012.

Question

Quizplus · Accepted Answer

The overstatement of the 2011 ending inventory causes the 2011 net income to be overstated, the 2012 beginning inventory to be overstated and the 2012 net income to be understated. Stockholders' equity as of the end of 2012 is correct because the 2011 net income overstatement is counter-balanced by the understatement of the 2012 net income.

An Overstatement of the 2011 Ending Inventory Results in an Overstatement