At the End of Year 1, ABC Inc

question 120

Multiple Choice

At the end of Year 1, ABC Inc.'s inventories were overstated by $10,000.At the end of Year 2 its inventories were overstated by $20,000.Assuming that ABC Inc.is subject to a 20% tax rate, the effect of these overstatements on the company's Year 2 Cost of Goods Sold would be an:

• A)Understatement of $10,000.
• B)Overstatement of $10,000.
• C)Overstatement of $20,000.
• D)Understatement of $20,000.