An Error That Results in Overstating Ending Inventory Would Have

question 133

Multiple Choice

An error that results in overstating ending inventory would have what effect on the company's financial statements in the current year?

• A)Ending inventory will be overstated, COGS will be understated and net income, retained earnings and equity will be overstated.
• B)Ending inventory will be overstated, COGS will be overstated and net income, retained earnings and equity will be overstated.
• C)Ending inventory will be overstated, COGS will be understated and net income, retained earnings and equity will be understated.
• D)Ending inventory will be overstated, COGS will be overstated and net income, retained earnings and equity will be understateD.Overstating ending inventory will overstate assets (inventory) and understate expenses (cost of goods sold), which will overstate net income, retained earnings and equity. It will have no effect on the statement of cash flows.