How does an error that results in an overstatement of ending inventory affect the elements of the company's financial statements in the current year?
A)Option A
B)Option B
C)Option C
D)Option D

Question

How does an error that results in an overstatement of ending inventory affect the elements of the company's financial statements in the current year? 
A)Option A 
B)Option B 
C)Option C 
D)Option D

Quizplus · Accepted Answer

An error that results in an overstatement of ending inventory affects the elements of the company's financial statements in the current year as follows:

A) Assets will be overstated because ending inventory is an asset on the balance sheet.

B) Cost of goods sold will be understated because ending inventory, which is subtracted from cost of goods sold to calculate gross profit, is overstated.

C) Gross profit will be overstated because cost of goods sold is understated.

D) Net income will be overstated because gross profit is overstated.

How Does an Error That Results in an Overstatement of Ending