witem 16-Score: 0% (0 of 1) Ending inventory is understated due to cost of goods

Question

witem 16-Score: 0% (0 of 1) Ending inventory is understated due to cost of goods sold being overstated, the current year effect is: Income is understated. Income is overstated. Retained Earnings are overstated. Assets are overstated. Feedback: Incorrect. When the cost/expenses are higher (overstled) due to an error it causes net income to be lower or understated. When ending inventory (asset) is lower (understated) due to an error then the total assets of the company will also be too low (understated) Objective Association . 6. Analyze the effects of inventory errors on the financial statements es l Cengage Technical Support I Nelson Technical Support 1 Accessibility l Version 8.036.S 9:31 PM 12/9/2017 5

Explanation / Answer

Dear student....Thank you for using chegg....correct answer is income is understated ....This is because

Gross profit = Sales - Cost of Goods sold

If cost of goods sold are overstated then it means that gross profit is undersated which ulimately results in understatement of income

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