Ending inventory for the current accounting period is overstated by $2,700.What effect will this error have on Cost of Goods Sold and Net Income for the current accounting period?

Question

Quizplus · Accepted Answer

The ending inventory is a part of the calculation of Cost of Goods Sold (COGS), and an overstatement of the ending inventory would lead to an understatement of COGS. As a result, the net income for the current accounting period would be overstated by the same amount as the overstatement of the ending inventory. In this case, the ending inventory is overstated by $2,700, so the net income for the current accounting period would be overstated by the same amount, $2,700.

Therefore, the best choice is B.

Ending Inventory for the Current Accounting Period Is Overstated by $2,700.What