The work-in-process ending inventory was understated.This error will cause:

Question

Quizplus · Accepted Answer

The ending work-in-process inventory is understated, which means that the cost of goods manufactured is overstated. This is because the cost of goods manufactured is calculated by adding the beginning work-in-process inventory to the cost of goods put into production and then subtracting the ending work-in-process inventory. If the ending work-in-process inventory is understated, then the cost of goods manufactured will be overstated.The cost of goods sold is calculated by adding the beginning finished goods inventory to the cost of goods manufactured and then subtracting the ending finished goods inventory. If the cost of goods manufactured is overstated, then the cost of goods sold will also be overstated.Net income is calculated by subtracting the cost of goods sold from the revenue. If the cost of goods sold is overstated, then the net income will be understated.

The Work-In-Process Ending Inventory Was Understated