If ending inventory for the year ended December 31, 2013, is overstated by $25,000:

Question

Quizplus · Accepted Answer

Ending inventory is part of Cost of Goods Sold (COGS) in the income statement. If ending inventory is overstated, it means that COGS is understated by the same amount, which leads to a higher net income. Therefore, if ending inventory for 2013 is overstated, net income for 2014 will be understated by the same amount (in this case, $25,000).

If Ending Inventory for the Year Ended December 31, 2013