Overstating ending inventory will overstate all of the following except
A) assets.
B) cost of goods sold.
C) net income.
D) equity.

Question

Quizplus · Accepted Answer

Overstating ending inventory will increase assets (since inventory is an asset), but it will not affect the cost of goods sold (since that is calculated based on beginning inventory, purchases, and ending inventory). Overstating ending inventory will also increase net income (since it will decrease the amount of costs that are recognized as expenses), and equity (since net income increases equity).

Overstating Ending Inventory Will Overstate All of the Following Except