Asked by Sierra Ballard on May 04, 2024
Verified
Understating ending inventory understates both current and total assets.
Total Assets
The sum of all current and non-current assets owned by a business, indicating its total resources.
- Recognize the impact of inventory valuation errors on financial statements and company performance indicators.
- Comprehend the implications of cost flow assumptions on the valuation of ending inventory and cost of goods sold.
Verified Answer
ZK
Zybrea KnightMay 06, 2024
Final Answer :
True
Explanation :
Ending inventory is a part of the current assets and is also used to calculate the cost of goods sold (COGS) for the income statement, which affects the total assets on the balance sheet. Therefore, understating ending inventory will result in understating both current and total assets.
Learning Objectives
- Recognize the impact of inventory valuation errors on financial statements and company performance indicators.
- Comprehend the implications of cost flow assumptions on the valuation of ending inventory and cost of goods sold.
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