Assume that ending inventory in fiscal 2012 is overstated by $1,000.What impact will this have on fiscal 2012 financial reporting?
A)Retained earnings is overstated by $1,000.
B)Gross margin is understated by $1,000.
C)Cost of sales is overstated by $1,000.
D)Inventory is understated on the balance sheet.

Question

Quizplus · Accepted Answer

An overstatement of ending inventory leads to an overstatement of net income, which in turn overstates retained earnings.

Assume That Ending Inventory in Fiscal 2012 Is Overstated by $1,000.What