Newcastle Company has the following inventory data for the current period: Assume that the ending inventory is understated by $5,000.What is the effect on the current period's net income?

Question

Newcastle Company has the following inventory data for the current period:  Assume that the ending inventory is understated by $5,000.What is the effect on the current period's net income?

Quizplus · Accepted Answer

Since the ending inventory is understated by $5,000, the cost of goods sold will be overstated by $5,000, leading to a decrease in net income. Therefore, the current period's net income will be understated by $5,000.

Newcastle Company Has the Following Inventory Data for the Current