An overstatement of ending inventory results in which of the following in the present period?
A)Overstatement of cost of goods sold.
B)Overstatement of total assets.
C)Understatement of net income.
D)Understatement of retained earnings.

Question

Quizplus · Accepted Answer

An overstatement of ending inventory will result in a higher value of total assets as ending inventory is part of the current assets section on the balance sheet. It will not affect the cost of goods sold or net income as both are calculated based on the beginning inventory, purchases, and ending inventory of the previous period. It will also not affect retained earnings directly as it is a component of shareholders' equity.

An Overstatement of Ending Inventory Results in Which of the Following