If an error in valuing inventory occurs in one year:
A)It has no effect upon income in the following year.
B)It has no effect upon the income statement,only on the balance sheet.
C)It is self-correcting after two years.
D)Retained earnings will be adversely affected until corrected.

Question

Quizplus · Accepted Answer

An error in valuing inventory in one year is self-correcting after two years because the overstatement or understatement of inventory will reverse when the inventory is sold, affecting the cost of goods sold and net income in the subsequent period.

If an Error in Valuing Inventory Occurs in One Year