If the amount assigned to ending inventory is incorrect, then:
A) the balance sheet is affected, but the income statement is not.
B) the income statement is affected, but the balance sheet is not.
C) the balance sheet is affected, but cost of goods sold is not.
D) both the balance sheet and income statement are affected.

Question

Quizplus · Accepted Answer

The amount assigned to ending inventory impacts the cost of goods sold (COGS) which affects the income statement. Additionally, the ending inventory value is a component of total assets on the balance sheet, so if it is incorrect, the balance sheet is also impacted. Therefore, both the balance sheet and income statement are affected.

If the Amount Assigned to Ending Inventory Is Incorrect, Then