In the year following an overstatement of ending inventory,the year-end owners' equity will be correctly stated.

Question

Quizplus · Accepted Answer

An overstatement of ending inventory results in an overstatement of net income in the current period. This overstatement of net income increases the year-end owners' equity. However, in the following year, when the overstatement of ending inventory is corrected, the net income will be lower, resulting in a decrease in owners' equity. Overall, the correction of the overstatement will lead to the correct statement of year-end owners' equity in the following year.

In the Year Following an Overstatement of Ending Inventory,the Year-End