West Corporation's Year 1 ending inventory was overstated by $20,000;however,ending inventory for Year 2 was correct.Which of the following statements is correct?
A)Net income for Year 1 is understated.
B)Retained earnings at the end of Year 2 is overstated.
C)Cost of goods sold for Year 1 is overstated.
D)Cost of goods sold for Year 2 is overstated.

Question

Quizplus · Accepted Answer

Overstating inventory at the end of Year 1,but correctly reporting inventory at the end of Year 2 will cause cost of goods sold to be understated for Year 1 and overstated for Year 2.However,by the end of Year 2,retained earnings will be correctly stated.

West Corporation's Year 1 Ending Inventory Was Overstated by $20,000;however,ending