If cost of goods sold is understated by $6,000 for this year,what effect will this have on income before income taxes in the following year?
A)understated by $3,000
B)overstated by $6,000
C)understated by $6,000
D)no effect

Question

Quizplus · Accepted Answer

If the cost of goods sold is understated by $6,000, it means that the expenses are lower than they should be, leading to an overstatement of income before taxes for the current year. In the following year, the beginning inventory will be overstated, leading to an understatement of income by $6,000 as the error reverses.

If Cost of Goods Sold Is Understated by $6,000 for This