Hollander Company Hired Some Students to Help Count Inventory During

Multiple Choice

Hollander Company hired some students to help count inventory during their semester break. Unfortunately, the students added incorrectly and the 2014 ending inventory was overstated by $5,000. What would be the effect of this error in ending inventory?

A) 2014 net income would be overstated.
B) 2014 net income would be understated.
C) 2014 ending retained earnings would be understated.
D) 2014 cost of goods sold would be overstateD.The overstatement of the ending inventory causes cost of goods sold to be understated and net income to be overstated.