Ranger Company uses a periodic inventory system.If the company's beginning inventory in the current year is overstated,and that is the only error in the current year,then the company's income for the current year will be
A) understated and assets correct.
B) understated and assets overstated.
C) overstated and assets overstated.
D) understated and assets understated.

Question

Quizplus · Accepted Answer

If the beginning inventory is overstated, then the cost of goods sold will be overstated and the net income will be understated. However, the assets will remain correct because the value of inventory is included in assets and the error only relates to the beginning inventory, not any other assets.

Ranger Company Uses a Periodic Inventory System