An overstatement of reported net income for the current year may result from
A)an overstatement of ending inventory in the previous period
B)an overstatement of ending inventory in the current period
C)failure to record accrued payroll liabilities
D)failure to record expiration of prepaid insurance

Question

Quizplus · Accepted Answer

Overstatement of ending inventory in the current period will increase the cost of goods sold, which in turn will decrease the expenses and result in an overstatement of net income. The other options either relate to the previous period (option A) or involve understating expenses (options C and D).

An Overstatement of Reported Net Income for the Current Year