If the ending inventory in Period 1 is understated, gross profit for Year 1 is:
A)overstated.
B)understated.
C)not affected.
D)determined by beginning inventory.

Question

Quizplus · Accepted Answer

If the ending inventory in Period 1 is understated, it means that the cost of goods sold in Period 1 is overstated. As a result, the gross profit for Year 1 will be understated because the cost of goods sold is subtracted from the revenue to calculate gross profit.

If the Ending Inventory in Period 1 Is Understated, Gross