Errors Occasionally Occur When Physically Counting Inventory Items on Hand

question 91

Essay

Errors occasionally occur when physically counting inventory items on hand. Identify the financial statement effects of an overstatement of the ending inventory in the current period. If the error is not corrected how does it affect the financial statements for the following year?

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Definitions:

Summons

a legal document issued by a court or administrative agency requiring the recipient to appear in court or respond to a legal proceeding.

Arbitration

A method of resolving disputes outside the courts, where the parties present their case to a neutral third-party arbitrator who makes a binding decision.

Litigation

The process of taking legal action or resolving disputes in court.

Costly

Pertaining to a high expenditure or the requiring of significant resources, either financially or in terms of effort.