What effect will an overstatement of ending inventory at the end of Year 1 have on the amounts reported on the Year 1 financial statements?
A)Overstatement of cost of goods sold
B)Overstatement of total assets
C)Understatement of net income
D)Understatement of retained earnings

Question

Quizplus · Accepted Answer

An overstatement of inventory at the end of Year 1 overstates assets (inventory)and stockholders' equity (retained earnings)at the end of Year 1.The overstatement also understates expenses (cost of goods sold),which overstates the amount of net income reported for Year 1.

What Effect Will an Overstatement of Ending Inventory at the End