An overstatement of ending merchandise inventory in the current period results in an understatement of net income in the current period.

Question

Quizplus · Accepted Answer

An overstatement of ending merchandise inventory in the current period results in an overstatement of net income in the current period because overstating ending inventory decreases the cost of goods sold, thereby increasing gross profit and net income.

An Overstatement of Ending Merchandise Inventory in the Current Period