An Error in the Physical Count of Goods on Hand

question 160

Short Answer

An error in the physical count of goods on hand at the end of a period resulted in a $10,000 overstatement of the ending inventory. The effect of this error in the current period is $$\begin{array} { l c c } & \text { Cost of Goods Sold } & \text { Net Income } \\\text { a. } & \text { Understated } & \text { Understated } \\\text { b. } & \text { Overstated } & \text { Overstated } \\\text { c. } & \text { Understated } & \text { Overstated } \\\text { d. } & \text { Overstated } & \text { Understated }\end{array}$$

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Definitions:

Price Discounting

A strategy of reducing the selling price of goods or services to attract customers or drive sales volume.