An error in the physical count of goods on hand at the end of a period resulted in a $10,000 overstatement of the ending inventory. The effect of this error in the current period is Cost of Goods Sold$\quad $ Profit A) Understated$\quad $$\quad $ Understated B) Overstated $\quad $$\quad $Overstated C) Understated $\quad $$\quad $Overstated D) Overstated $\quad $$\quad $Understated

Question

Quizplus · Accepted Answer

An overstatement of ending inventory results in an understatement of the cost of goods sold because the ending inventory is subtracted from the cost of goods available for sale to calculate the cost of goods sold. Consequently, profit is overstated because the cost of goods sold is understated, leading to a higher gross profit.

An Error in the Physical Count of Goods on Hand \quad

An Error in the Physical Count of Goods on Hand $\quad$