The understatement of the beginning inventory balance causes:
A) Cost of goods sold to be understated and net income to be understated.
B) Cost of goods sold to be understated and net income to be overstated.
C) Cost of goods sold to be overstated and net income to be overstated.
D) Cost of goods sold to be overstated and net income to be understated.
E) Cost of goods sold to be overstated and net income to be correct.

Question

Quizplus · Accepted Answer

An understated beginning inventory leads to a lower cost of goods sold, which results in a higher net income.

The Understatement of the Beginning Inventory Balance Causes