Hollander Company hired some students to help count inventory during their semester break.Unfortunately,the students added incorrectly and the 2010 ending inventory was overstated by $5,000.What would be the effect of this error in ending inventory?
A)2010 net income would be overstated.
B)2010 net income would be understated.
C)2010 ending retained earnings would be understated.
D)2010 cost of goods sold would be overstated.

Question

Quizplus · Accepted Answer

The overstatement of the ending inventory causes cost of goods sold to be understated and net income to be overstated.

Hollander Company Hired Some Students to Help Count Inventory During