The overstatement 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

Overstating the beginning inventory balance will result in a higher cost of goods sold and a lower gross profit, which will ultimately lead to an understatement of net income.

The Overstatement of the Beginning Inventory Balance Causes