Upaway Company hired some students to help count inventory during their semester break.Unfortunately,the students added incorrectly and ending inventory was overstated by $12,000.What would be the effect of this error in ending inventory?
A)Profit would be overstated.
B)Profit would be understated.
C)Ending retained earnings would be understated.
D)Cost of goods sold would be overstated.

Question

Quizplus · Accepted Answer

When ending inventory is overstated, cost of goods sold is understated, leading to an overstatement of profit.

Upaway Company Hired Some Students to Help Count Inventory During