Ending inventory for the year ended December 31,2015,is understated by $8,000.How will this error affect net income for 2016?

Question

Quizplus · Accepted Answer

The understatement of ending inventory in 2015 means that the cost of goods sold was overstated, leading to an understatement of net income for 2015. In 2016, the beginning inventory will also be understated, which will result in an understatement of the cost of goods sold for 2016, thereby overstating net income by $8,000.

Ending Inventory for the Year Ended December 31,2015,is Understated by $8,000.How