When accounts receivable are overstated,revenues are overstated.Similarly,when inventory is overstated,cost of goods sold is usually _________.
A)overstated
B)unchanged
C)inadequate
D)understated

Question

Quizplus · Accepted Answer

When inventory is overstated, it means that the ending inventory is reported higher than it actually is. This results in a lower cost of goods sold (COGS) because COGS is calculated as beginning inventory plus purchases minus ending inventory. Therefore, if ending inventory is overstated, COGS will be understated.

When Accounts Receivable Are Overstated,revenues Are Overstated