Saturday, October 10, 2020

If a company understates its ending balance of inventory in year 1 and it records inventory correctly in year 2, which one of the following is true?

If a company understates its ending balance of inventory in year 1 and it records inventory correctly in year 2, which one of the following is true?


A) Net income is overstated in year 1.

B) Cost of goods sold is understated in year 2.

C) Net income is understated in year 2.

D) Retained earnings is understated in year 2.


Answer: B

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