Overstating the ending inventory will result in understating the cost of good sold and overstating profits for the period.

Question

Quizplus · Accepted Answer

Overstating the ending inventory would result in fewer goods being accounted for as sold, which would decrease the cost of goods sold and increase profits. This is because the cost of goods sold is calculated by subtracting the cost of ending inventory from the total cost of goods available for sale.

Overstating the Ending Inventory Will Result in Understating the Cost