Assume that a purchase invoice for $1,000 was appropriately recorded in fiscal 2012, but the inventory was excluded in error during the ending inventory count. What impact will this not have on fiscal 2013 financial reporting?
A)Beginning inventory is understated by $1,000.
B)Gross margin is understated by $1,000.
C)Cost of sales is overstated by $1,000.
D)Inventory is overstated on the balance sheet.

Question

Quizplus · Accepted Answer

The inventory error in fiscal 2012 will not cause the inventory to be overstated on the balance sheet in fiscal 2013. Instead, the beginning inventory for fiscal 2013 will be understated, affecting cost of sales and gross margin.

Assume That a Purchase Invoice for $1,000 Was Appropriately Recorded