Use the following information for question 102-103.
During its December 31, 2014 year-end inventory count, Jefferson Company failed to count items in transit to which it had legal title. As a result of this error, ending inventory was understated by $30,000.
-As a result of this error, 2014 cost of goods sold will be
A) understated by $30,000.
B) overstated by $30,000.
C) correct.
D) greater when average cost is used.

Question

Quizplus · Accepted Answer

When ending inventory is understated by $30,000, it means that these goods were not counted as part of the inventory but were instead considered as sold. This leads to the cost of goods sold (COGS) being overstated by $30,000, because the cost of these items is incorrectly included in COGS instead of inventory.

Use the Following Information for Question 102-103