Which of the following is an INCORRECT statement if ending inventory is overstated?
A)Cost of goods sold is overstated.
B)Gross profit is overstated.
C)Net income is overstated.
D)Income tax is overstated.

Question

Quizplus · Accepted Answer

If ending inventory is overstated, cost of goods sold is understated, not overstated. This is because the cost of goods sold is calculated as beginning inventory plus purchases minus ending inventory. If ending inventory is overstated, it results in a lower cost of goods sold.

Which of the Following Is an INCORRECT Statement If Ending