Question

If for a company, the inventory increased by 260% from the previous year and the Cost...

If for a company, the inventory increased by 260% from the previous year and the Cost of Goods Sold decreased by 8%, what does this relationship mean?
Does this relationship affect the risk of material misstatement?

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

This relationship means that Invenotry is increasing by huge percentage but the goods are not being sold comparitively. In fact the sales have fallen by 8%.

Yes this relationship affects the risk of material misstatement because generally if the demand of the product of a company is high only then will the company be purchasing in such huge percentage. Since the demand is more, the company is going to sale more, its revenue will be more and also the cost of goods sold will be more because it shows the cost of inventory which is sold is very less as compared to sales revenue. Company's purpose behind misstating would be to show decreased cost of goods sold in order to show increased profits which will increase its value and hence share price of the company.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Ortiz & Co. reported cost of goods sold of $2,200,000 this year. The inventory account increased...
Ortiz & Co. reported cost of goods sold of $2,200,000 this year. The inventory account increased by $180,000 during the year to an ending balance of $585,000. What was the cost of merchandise that Ortiz's purchased during the year? Multiple Choice $2,380,000. $2,020,000. $1,615,000. $2,785,000.
1.Jackson Manufacturing Company had a beginning inventory of $30,000. During the year, the company recorded inventory...
1.Jackson Manufacturing Company had a beginning inventory of $30,000. During the year, the company recorded inventory purchases of $90,000 and cost of goods sold of $100,000. The ending inventory must equal: a.$54,000. b.$52,000. c.$20,000. d.$50,000. 2.Assuming the perpetual inventory system is used, which of the following statements about the multistep income statement is correct? a.Contra-revenue accounts increase Other Expenses. b.Sales discounts affect the calculation of Gross Profit. c.Sales discounts are a Selling, General, and Administrative Expense. d.Contra-accounts affect the Cost...
1. At the end of the year, Blue Sales Company omitted $36,400 of inventory from their...
1. At the end of the year, Blue Sales Company omitted $36,400 of inventory from their year-end inventory count. As a result, Net income for the year will be understated and cost of goods sold will be correct. Net income for the year will be correct and cost of goods sold will be overstated. Net income for the year will be understated cost of goods sold will be overstated. Net income for the year will be overstated cost of goods...
Horizontal Analysis The comparative temporary investments and inventory balances of a company follow. Current Year Previous...
Horizontal Analysis The comparative temporary investments and inventory balances of a company follow. Current Year Previous Year Accounts payable $57,630 $51,000 Long-term debt   36,992   54,400 Based on this information, what is the amount and percentage of increase or decrease that would be shown on a balance sheet with horizontal analysis? Amount of Change Increase/Decrease Percentage Accounts payable $ % Long-term debt $ % Vertical Analysis Income statement information for Einsworth Corporation follows: Sales $556,000 Cost of goods sold 155,680 Gross...
A company uses the cost-of-goods-sold method of reporting lower-of-cost-to-market adjustments to inventory. The company reports the...
A company uses the cost-of-goods-sold method of reporting lower-of-cost-to-market adjustments to inventory. The company reports the following balances for the first half of the fiscal year: Month Inventory at cost Inventory at market January $78,000 $76,000 February $92,000 $89,000 March $66,000 $72,000 April $102,000 $100,000 May $74,000 $69,000 June $97,000 $92,000    Which effect does the adjustment of inventory value to market have on the year-to-date cost of goods sold?   The answer is $5,000 increase, but I am wondering how...
Here are data for Badger Company for the month of June: Sales $158,000 Cost of goods...
Here are data for Badger Company for the month of June: Sales $158,000 Cost of goods sold $109,000 Inventory Decreased $15,600 Accounts payable Increased $6,100 What amount of cash payments did Badger make to its suppliers of inventory during June?
Nonny Company uses the LIFO method of inventory valuation. For Year 6, cost of goods sold...
Nonny Company uses the LIFO method of inventory valuation. For Year 6, cost of goods sold was $150,000. Beginning inventory was $25,000 and ending inventory was $30,000. If Nonny had used the FIFO method of inventory valuation, beginning inventory would have been $15,000 and ending inventory would have been $40,000. What would Nonny’s cost of goods sold in Year 6 have been if Nonny had used FIFO?
Yoseff Company uses the LIFO method of inventory valuation. For Year 5, cost of goods sold...
Yoseff Company uses the LIFO method of inventory valuation. For Year 5, cost of goods sold was $45,000. Beginning inventory was $5,000 and ending inventory was $6,000. If Yoseff had used the FIFO method of inventory valuation, beginning inventory would have been $8,000 and ending inventory would have been $11,000. What would Yoseff’s cost of goods sold in Year 5 have been if Yoseff had used FIFO?
Assuming Christy’s Cookie Company uses the FIFO inventory cost allocation method, determine the ending inventory balance...
Assuming Christy’s Cookie Company uses the FIFO inventory cost allocation method, determine the ending inventory balance as of December 31st and the Cost of Goods Sold for the year. Christy’s Cookie Company uses the periodic system to track changes in the inventory account. Date Quantity Purchased Quantity Sold Cost per Unit Quantity on Hand 1/1 $10 8 3/25 25 $12 33 7/14 15 18 10/22 16 $14 34 12/31 4 30 Cost of Goods Sold for the year $________________________ Ending...
The income statement of Sheffield Company is shown below. SHEFFIELD COMPANY INCOME STATEMENT FOR THE YEAR...
The income statement of Sheffield Company is shown below. SHEFFIELD COMPANY INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2017 Sales revenue $7,430,000 Cost of goods sold Beginning inventory $2,090,000 Purchases 4,770,000 Goods available for sale 6,860,000 Ending inventory 1,440,000 Cost of goods sold 5,420,000 Gross profit 2,010,000 Operating expenses Selling expenses 440,000 Administrative expenses 690,000 1,130,000 Net income $880,000 Additional information: 1. Accounts receivable decreased $350,000 during the year. 2. Prepaid expenses increased $150,000 during the year. 3. Accounts...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT