A material error in ending inventory requires special analysis because it ________.
A) affects two years of cost of goods sold, income tax expense, net income, and retained earnings
B) counter balances over a minimum of three years
C) affects the balance sheet as well as the income statement for one year
D) reflects poorly on the quality of the company's accounting reliability

Question

Quizplus · Accepted Answer

A material error in ending inventory affects two years of financial statements because it impacts the cost of goods sold, income tax expense, net income, and retained earnings for both the year in which the error occurred and the following year.

A Material Error in Ending Inventory Requires Special Analysis Because