Question

If the amount assigned to ending inventory is INCORRECT, A. The balance sheet is affected, but...

If the amount assigned to ending inventory is INCORRECT,

A. The balance sheet is affected, but the income statement is not.

B. The income statement is affected, but the balance sheet is not.

C. The balance sheet is affected, but cost of goods sold is not.

D. Both the balance sheet and the income statement are affected.

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Homework Answers

Answer #1

If the amount assigned to ending inventory is INCORRECT,Both the balance sheet and the income statement are affected.

Correct option is D.

If ending inventory is incorrectly stated, it will effect cost of goods sold and thus net income will get effected.

If ending inventory is overstated, Cost of goods sold will be understated and thus net income will be overstated. On the other side, if ending inventory is understated, cost of good sold will be overstated and thus net income will be understated.

Kindly comment if you need further assistance.

Thanks‼!

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