Assume that ending inventory in fiscal 2016 is overstated by $1,000.What impact will this have on fiscal 2016 financial reporting?
A)Retained earnings is overstated by $1,000.
B)Gross margin is understated by $1,000.
C)Cost of sales is overstated by $1,000.
D)Inventory is understated on the balance sheet.

Question

Quizplus · Accepted Answer

An overstatement of ending inventory will lead to an overstatement of retained earnings because net income is overstated due to lower cost of goods sold.

Assume That Ending Inventory in Fiscal 2016 Is Overstated by $1,000.What