Asked by Canon Graef on Jun 12, 2024
Verified
If ending inventory for the year is overstated, owner's equity reported on the balance sheet at the end of the year is understated.
Ending Inventory
The value of goods available for sale at the end of an accounting period.
Owner's Equity
The residual interest in the assets of a business after all liabilities have been deducted, often referred to as shareholder's equity or net worth.
- Understand the impact of erroneous inventory reporting on financial results and equity belonging to the owner.
Verified Answer
M?
Muhittin ?ekerda?Jun 16, 2024
Final Answer :
False
Explanation :
If ending inventory is overstated, cost of goods sold will be understated, leading to overstated net income, which in turn causes owner's equity to be overstated, not understated.
Learning Objectives
- Understand the impact of erroneous inventory reporting on financial results and equity belonging to the owner.
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