The end of the financial year for Ziggie's Trading Company is 30 June 2019. At that date, ending inventory was understated by $3 650. The profit for the year ending 30 June 2019 will be:

Question

Quizplus · Accepted Answer

When ending inventory is understated, it means that the cost of goods sold (COGS) is overstated, which in turn leads to the understatement of profit. This is because the COGS is deducted from revenue to calculate profit, and if COGS is higher than it should be, profit is lower than it should be.

The End of the Financial Year for Ziggie's Trading Company