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

Question

Quizplus · Accepted Answer

If ending inventory is understated, the cost of goods sold will be overstated because the inventory that was not recorded as being on hand will be assumed to have been sold.

Understating Ending Inventory in the Current Year Causes Cost of Goods