If a company overstates its Inventory balance at the end of 2013 due to an error, its Retained Earnings will also be overstated on the 2013 balance sheet.

Name: If a company overstates its Inventory balance at the end of 2013 due to an error, its Retained Earnings will also be overstated on the 2013 balance sheet.
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Overstating inventory will understate cost of goods sold, resulting in higher net income and higher retained earnings in the current year.

If a Company Overstates Its Inventory Balance at the End