If the gross profit percentage used in the gross profit inventory method were understated, which of the following is correct?

Question

Quizplus · Accepted Answer

When the gross profit percentage is understated in the gross profit inventory method, it results in a lower estimation of the gross profit. This, in turn, leads to a higher cost of goods sold calculation, because the cost of goods sold is inversely related to the gross profit. Consequently, if the cost of goods sold is higher, the ending inventory is understated because the ending inventory is calculated by subtracting the cost of goods sold from the total goods available for sale.

If the Gross Profit Percentage Used in the Gross Profit