A company fails to record one storeroom full of inventory in its year-end inventory records.As a result,this will cause an
A)overstatement of inventory on the year-end balance sheet.
B)understatement of gross profit in the following year.
C)overstatement of retained earnings at the end of the year.
D)overstatement of cost of goods sold for the current year.

Question

Quizplus · Accepted Answer

Failing to record a storeroom full of inventory will result in an understatement of ending inventory and an overstatement of cost of goods sold for the current year. This will ultimately lead to an understatement of gross profit in the following year.

A Company Fails to Record One Storeroom Full of Inventory