Which of the following will result if the current year's ending inventory amount is understated in the cost of goods sold calculation?
A) Cost of goods sold will be overstated.
B) Total assets will be overstated.
C) Net income will be overstated.
D) Both cost of goods sold and net income will be overstated.

Question

Quizplus · Accepted Answer

If the current year's ending inventory amount is understated in the cost of goods sold calculation, it means that the cost of goods sold will be calculated on a higher amount of inventory, resulting in an overstated cost of goods sold. This, in turn, will result in a lower gross profit and a lower net income. Therefore, option A - Cost of goods sold will be overstated - is the best choice.

Which of the Following Will Result If the Current Year's