Assume that a purchase invoice for $1,000 was appropriately recorded in fiscal 2019, but the inventory was excluded in error during the ending inventory count. What impact will this have on fiscal 2019 financial reporting?
A)Gross margin is overstated.
B)Cost of sales is overstated by $1,000.
C)Ending inventory is overstated by $1,000.
D)Cost of goods available for sale is overstated by $1,000.

Question

Quizplus · Accepted Answer

Since the inventory was excluded in error during the ending inventory count, it means that the cost of goods sold is understated by $1,000 which in turn leads to an overstatement of gross margin. Therefore, the correct answer is B which states that the cost of sales is overstated by $1,000.

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