When an overstatement misstatement in inventory occurs
A)cost of goods sold is understated
B)net income is overstated
C)inventory is understated
D)cost of goods sold is overstated
E)net income is understated
F)both A and B
G)both C and D

Question

Quizplus · Accepted Answer

When an overstatement in inventory occurs, the cost of goods sold is understated because the ending inventory is part of the cost of goods sold calculation. This understatement of cost of goods sold leads to an overstatement of net income, as lower costs increase profits.

When an Overstatement Misstatement in Inventory Occurs