Assume That a Purchase Invoice for $1,000 Was Appropriately Recorded

Multiple Choice

Assume that a purchase invoice for $1,000 was appropriately recorded in fiscal 2012, but the inventory was excluded in error during the ending inventory count. What impact will this have on fiscal 2012 financial reporting?

A) Beginning inventory is understated by $1,000.
B) Gross margin is understated by $1,000.
C) Cost of sales is understated by $1,000.
D) Inventory is overstated on the balance sheet.