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

Question

Quizplus · Accepted Answer

An understatement misstatement in inventory would result in an understatement of cost of goods sold and an overstatement of net income. Therefore, options A and B are incorrect. The misstatement would also result in an overstatement of inventory which would lead to an overstatement of assets on the balance sheet. Options C and F are incorrect. As a result, the only correct choice is G, as it correctly identifies that cost of goods sold is overstated and net income is understated.

When an Understatement Misstatement in Inventory Occurs