Assume that a $1,000 purchase invoice received close to year-end is not recorded in fiscal 2016,but the inventory is appropriately included in the ending inventory count.What impact will this have on fiscal 2016 financial reporting?
A)Purchases are overstated.
B)Purchases are understated.
C)Gross margin is understated.
D)Cost of sales is overstated.

Question

Quizplus · Accepted Answer

If the purchase invoice is not recorded in fiscal 2016, then purchases are understated. This will result in an understatement of the cost of sales and an overstatement of the gross margin for the year.

Assume That a $1,000 Purchase Invoice Received Close to Year-End