If, at the end of a period, a company erroneously excluded some goods from its ending inventory and also erroneously did not record the purchase of these goods in its accounting records, these errors would cause
A) the ending inventory and retained earnings to be understated.
B) the ending inventory, cost of goods sold, and retained earnings to be understated.
C) no effect on net income, working capital, and retained earnings.
D) cost of goods sold and net income to be understated.

Question

Quizplus · Accepted Answer

The exclusion of goods from both the ending inventory and purchase records means that the cost of goods sold and ending inventory are both understated by the same amount, resulting in no effect on net income, working capital, and retained earnings.

If, at the End of a Period, a Company Erroneously