A $25,000 overstatement of the 2010 ending inventory was discovered after the financial statements for 2010 were prepared.Which of the following describes the effect of the inventory error on the 2010 financial statements?
A)Current assets were overstated and net income was understated.
B)Current assets were understated and net income was understated.
C)Current assets were overstated and net income was overstated.
D)Current assets were understated and net income was overstated.

Question

Quizplus · Accepted Answer

An overstatement of ending inventory overstates current assets and understates cost of goods sold and therefore overstates net income.

A $25,000 Overstatement of the 2010 Ending Inventory Was Discovered