A $15,000 overstatement of the current year's ending inventory was discovered after the financial statements for the year were prepared.How would that inventory error impact the current year's financial statements?
A) Current assets were overstated and net income was understated.
B) Current assets were understated and net income was understated.
C) Current assets were overstated and net income was overstated.
D) Current assets were understated and net income was overstated.

Question

Quizplus · Accepted Answer

An overstatement of ending inventory leads to an overstatement of current assets and net income because ending inventory is part of both the balance sheet and the cost of goods sold calculation, which affects net income.

A $15,000 Overstatement of the Current Year's Ending Inventory Was