Understating ending inventory in the current year causes cost of goods sold in the current year to be understated.

Name: Understating ending inventory in the current year causes cost of goods sold in the current year to be understated.
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Question

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Understating ending inventory in the current year causes cost of goods sold to be overstated because it reduces the amount of inventory available, making it appear that more goods were sold than actually were.

Understating Ending Inventory in the Current Year Causes Cost of Goods