Regan Company Regan Company reported net income of $95,000 for 2013.Early in 2014,the company discovered that its 2013 ending inventory was overstated by $5,000.
-Refer to the information provided for Regan Company.Determine the financial statement effects of the inventory error for 2014.

Question

Quizplus · Accepted Answer

The inventory error will result in the cost of goods sold for 2013 being overstated by $5,000. This means that expenses will be overstated and net income will be understated for 2013. However, since the error was discovered in 2014, the opening inventory for 2014 will be understated by $5,000, resulting in cost of goods sold being understated, and therefore expenses being understated and net income being overstated for 2014.

Regan Company Regan Company Reported Net Income of $95,000 for 2013.Early