Which of the following errors will normally result in overstatement of 2011 net income?
A)failure to record merchandise purchases in 2010
B)understatement of 2010 ending merchandise inventory
C)failure to record accrued salaries expense in 2010
D)overstatement of prepaid expense in 2010

Question

Quizplus · Accepted Answer

If the 2010 ending merchandise inventory is understated, then the cost of goods sold for that year will be overstated. This will in turn cause net income for 2011 to be overstated, since COGS is a major expense item. The other errors listed may have an impact on net income, but they are not as likely to result in an overstatement.

Which of the Following Errors Will Normally Result in Overstatement