The effect of an error resulting in an understatement of ending inventory is to:

Question

The effect of an error resulting in an understatement of ending inventory is to:

overstate the next period's beginning inventory.

understate cost of goods sold of the current period.

overstate cost of goods sold of the current period.

overstate operating expenses of the current period.

overstate the next period's beginning inventory.

understate cost of goods sold of the current period.

overstate cost of goods sold of the current period.

overstate operating expenses of the current period.

Explanation / Answer

If the ending inventory for a period is understated, the cost of goods sold for that period is overstated. Therefore, the correct answer is B.

The effect of an error resulting in an understatement of ending inventory is to overstate cost of goods sold of the current period.

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