Hanuv Corporation counts its ending inventory incorrectly in year 1,assuming no other inventory errors in future period,
A)the impact of the error effects the inventory account only.
B)the error effects profitability,net income and retained earnings for year 1 only.
C)the error extends in to future years indefinitely.
D)the error will self-correct by the end of year 2.

Question

Quizplus · Accepted Answer

The error will self-correct by the end of year 2 because the incorrect ending inventory of year 1 will become the incorrect beginning inventory of year 2. Over the two-year period, the total cost of goods sold will be correct, and the error will not extend beyond year 2 if no further errors are made.

Hanuv Corporation Counts Its Ending Inventory Incorrectly in Year 1,assuming