An error in the measurement of ending inventory affects the cost of sales on the current period's statement of earnings and ending inventory on the statement of financial position.

Question

Quizplus · Accepted Answer

An error in the measurement of ending inventory will affect both the cost of sales and the ending inventory on the financial statements. Specifically, an overstatement of ending inventory will result in an understatement of cost of sales and an overstatement of net income on the statement of earnings, as well as an overstatement of inventory on the statement of financial position. Conversely, an understatement of ending inventory will result in an overstatement of cost of sales and an understatement of net income on the statement of earnings, as well as an understatement of inventory on the statement of financial position.

An Error in the Measurement of Ending Inventory Affects the Cost