Question

After the physical inventory is completed *

quantities are listed on inventory summary sheets.

quantities are entered into various general ledger inventory accounts.

the accuracy of the inventory summary sheets is checked by the person listing the quantities on the sheets.

unit costs are determined by dividing the quantities on the summary sheets by the total inventory costs.

The evidence required for a reversal of a previous inventory write down would be *

a decline in selling prices.

an increase in selling prices.

an increase in products/ merchandise sold.

a decrease in products/ merchandise sold.

If ending inventory is understated in 2018, the 2019 ending owner’s equity will be *

correct

overstated.

understated

Owner’s equity is never affected by an inventory error.

Answer 1

Part 1) OPTION A------quantities are listed on inventory summary sheet

After the physical inventory is completed quantities are listed on inventory summary sheet.

Part 2)OPTION B---- increase in selling price

Reversal of inventory write down is done when there is an increase in selling price or increase in market value of inventory

Part 3)OPTION B---- overstated

If Ending inventory of 2018 is understated, that means opening stock of 2019 is understated which means net income is overstated, I.e owners equity is overstated