Asked by Alexis Klein on May 21, 2024
Verified
The beginning inventory was recorded as $10,000, when actual inventory on hand was $12,000.
A) Net income for the current year will be overstated.
B) Net income for the current year will be understated.
C) There will be no error effect on net income.
Beginning Inventory
The value of a company's inventory at the start of an accounting period, which is carried over from the end of the previous period.
Net Income
The total earnings of a company after all expenses and taxes have been deducted from total revenue.
Actual Inventory
The physical count of products or materials a company has available at a specific point in time.
- Identify the impact of inventory errors on net income.
Verified Answer
FR
Francisco RomeroMay 27, 2024
Final Answer :
A
Explanation :
Since the beginning inventory was recorded as $10,000 instead of the actual $12,000, the cost of goods sold will be understated and the gross profit will be overstated. This overstatement of gross profit will lead to an overstatement of net income.
Learning Objectives
- Identify the impact of inventory errors on net income.