AIf the Beginning Balance of the Inventory Account and the Cost

question 18

Essay

a.If the beginning balance of the Inventory account and the cost of items purchased or made during the period are correct, but an error resulted in understating the firm's ending inventory balance by $12,000, how would the firm's cost of goods sold be affected?
b.If management wanted to overstate net income, would ending inventory be understated or overstated? Explain your answer.

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Definitions:

Non-Normal Procedures

Statistical methods that do not assume the normal distribution of the data and are used for analysis.

One-sample T Statistic

A statistical measure used to test the hypothesis about the mean of a normally distributed population when the population variance is unknown, based on a sample.

Standard Deviation

A measure of the amount of variation or dispersion of a set of values, indicating how spread out the values in a data set are.

Normal Distribution

A continuous probability distribution that is symmetrical around the mean, showing that data close to the mean are more frequent in occurrence than data far from the mean.