All else being equal, which of the following statements with respect to the impact of inventory errors is NOT correct?
A) An overstatement of ending inventory will result in an understatement of income.
B) An overstatement of ending inventory will result in an overstatement of income.
C) An overstatement of beginning inventory will result in an understatement of income.
D) An understatement of beginning inventory will cause cost of goods sold to be understated.

Question

Quizplus · Accepted Answer

DA) An overstatement of ending inventory results in an overstatement of income because the cost of goods sold (COGS) is understated when ending inventory is overstated. This leads to higher income.D) An understatement of beginning inventory will cause the cost of goods sold to be overstated, not understated. This is because the COGS calculation starts with the beginning inventory; if it's understated, the COGS will be higher, leading to lower income.

All Else Being Equal, Which of the Following Statements with Respect