Ending inventory for the year ended December 31,2019,is understated by $23,000.How will this error affect net income for 2020?

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Quizplus · Accepted Answer

If ending inventory for 2019 is understated by $23,000, this means that the cost of goods sold (COGS) for 2019 is overstated by the same amount, leading to an understatement of net income for 2019. However, this error will carry over into 2020, causing the beginning inventory for 2020 to be understated by $23,000. This will result in the COGS for 2020 being understated, and consequently, the net income for 2020 will be overstated by $23,000.

Ending Inventory for the Year Ended December 31,2019,is Understated by $23,000.How