Multiple Choice
Phillips Corporation overstated its ending inventory on December 31, 2013. Which of the following answers correctly identifies the effect of the error on 2014 financial statements?
A) Gross margin overstated.
B) Cost of goods sold is overstated.
C) Ending inventory is understated.
D) Net income is overstateD.Overstating inventory at the end of 2013, but correctly reporting inventory at the end of 2014 will cause cost of goods sold to be understated for 2013 and overstated for 2014. However, it will not necessarily impact the 2014 inventory count.
Correct Answer:
Verified
Correct Answer:
Verified
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