Assume that a $100 purchase invoice received close to year-end is not recorded in fiscal 2019, but the inventory is appropriately included in the ending inventory count. What impact will this have on fiscal 2019 financial reporting?
A)Cost of sales is understated by $100.
B)Gross margin is understated.
C)Sales are understated by $100.
D)Operating profit is understated by $100.

Question

Quizplus · Accepted Answer

The cost of sales is understated by $100 because the purchase was not recorded, but the inventory was included, leading to an understatement of expenses and an overstatement of net income.

Assume That a $100 Purchase Invoice Received Close to Year-End