If the beginning inventory of the current year and the ending inventory of the past year were overstated by the same amount:
A)Retained earnings at the end of the current year would be correct.
B)Retained earnings at the end of the current year would be overstated.
C)Retained earnings at the end of the current year would be understated.
D)Net income for the current year would be correct.

Question

Quizplus · Accepted Answer

DIf the beginning inventory of the current year (which is the same as the ending inventory of the past year) is overstated by the same amount, the overstatement cancels out over the course of the year. This means that the cost of goods sold (COGS) calculation for the current year would not be affected by the overstatement, leading to a correct calculation of net income for the current year. Since net income flows into retained earnings, retained earnings at the end of the current year would also be correct.

If the Beginning Inventory of the Current Year and the Ending