Assume that a $1,000 purchase invoice received close to year-end is not recorded in fiscal 2012, but the inventory is appropriately included in the ending inventory count. What impact will this have on fiscal 2012 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

Since the purchase invoice was not recorded, purchases will be understated in fiscal 2012. This will result in an understatement of the cost of sales and an overstatement of the gross margin. However, since the inventory is appropriately included in the ending inventory count, the impact on the balance sheet will be not affected.

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