The ending merchandise inventory for the current year is overstated by $28,000.What effect will this error have on the following year's net income?

Question

Quizplus · Accepted Answer

The ending merchandise inventory for the current year is overstated by $28,000, which means that the cost of goods sold for the current year is understated by $28,000. As a result, the following year's net income will be overstated by the same amount ($28,000) due to the reduced cost of goods sold. Therefore, the correct choice is C, as the net income will be understated by $28,000.

The Ending Merchandise Inventory for the Current Year Is Overstated