An understatement of the ending inventory balance will understate cost of goods sold and overstate net income.

Name: An understatement of the ending inventory balance will understate cost of goods sold and overstate net income.
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Question

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An understatement of the ending inventory balance will overstate cost of goods sold and understate net income, because the cost of goods sold is calculated as beginning inventory plus purchases minus ending inventory.

An Understatement of the Ending Inventory Balance Will Understate Cost