An overstatement of the beginning inventory results in

A) an overstatement of net income.
B) an understatement of net income.
C) no effect on the period's net income.
D) a need to adjust purchases.

Question

An overstatement of the beginning inventory results inA) an overstatement of net income.B) an understatement of net income.C) no effect on the period's net income.D) a need to adjust purchases.

brett bettag · Accepted Answer

Final Answer : B, Explanation :  An overstatement of the beginning inventory leads to an overstatement of the cost of goods sold (since beginning inventory is part of the cost of goods sold calculation). This, in turn, results in an understatement of net income because higher costs mean lower profits.

An overstatement of the beginning inventory results in

A) an overstatement of net income.
B) an understatement of net income.
C) no effect on the period's net income.
D) a need to adjust purchases.

Definitions

Learning Objectives

Learning Objectives

Related questions