An understatement of ending inventory in the year 20-1 will cause netincome to be overstated in the year 20-2, assuming no other errors. (True/False)
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An understatement of ending inventory in the year 20-1 will cause net
income to be overstated in the year 20-2, assuming no other errors. (True/False)
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Solved in 2 steps
- In 2019, ending inventory is overstated. What is the effect of the error on net income in 2019 and 2020? A. Net income is understated in 2019 and 2020. B. Net income is understated in 2019 and overstated in 2020. C. Net income is overstated in 2019 and understated in 2020. D. Net income is overstated in 2019 and 2020.Several errors are listed below. Indicate the effect each error would have on 2020 net income by selecting a plus sign (+), minus sign (-) or NI (no impact). Part (a) has been completed as an example. Effect on 2020Net Income a. Failed to record a 2020 expense. + b. Ending 2019 inventory is understated. c. Ending 2020 accrued expense is overstated. d. Ending 2020 inventory is overstated. e. Ending 2019 accrued revenue is understated. f. Ending 2020 prepaid expense is overstated. g. Ending 2019 unearned revenue is overstated. h. Ending 2020 accrued revenue was overstated. i. Ending 2019 prepaid expense was overstated. j. Ending 2019 accrued expense is overstated. k. Ending 2020 unearned revenue is understated.Which of the following statements on inventory valuation errors is false? a. Over a two-year period, misstatements of ending inventory will balance themselves out. b. An overstatement of ending inventory overstates net income. c. An understatement in net income is the result of an overstatement in cost of goods sold. d. An overstatement of cost of goods sold overstates ending inventory.
- Do you agree with the following statements? Express your opinion on each statement. An inventory error that causes an understatement (or overstatement) for net income in one accounting period, if not corrected, will cause an overstatement (or understatement) in the next. Since an understatement (overstatement) of one period offsets the overstatement (understatement) in the next, such errors are said to correct themselves. Market usually means replacement cost of inventory when applied in the LCM. Cost of goods available for sale equals ending inventory plus cost of sales.Do you agree with the following statements? Express your opinion on each statement. An inventory error that causes an understatement (or overstatement) for net income in one accounting period, if not corrected, will cause an overstatement (or understatement) in the next. Since an understatement (overstatement) of one period offsets the overstatement (understatement) in the next, such errors as said to correct themselves. Market usually means replacement cost of inventory when applied in the LMC. Cost of goods available for sale equals the inventory plus cost of sales.An overstatement of ending inventory results in: Select one: a. an understatement of COGS and an overstatement of net income. b. an overstatement of COGS and an overstatement of net income. c. an understatement of COGS and an understatement of net income. d. an overstatement of COGS and an understatement of net income.
- An understatement of the ending inventory in Year 1, if not corrected, will cause which of the following? Group of answer choices A)The year 1 net income to be understated and Year 2 net income will be unaffected. B)The year 1 net income to be overstated and Year 2 net income to be overstated. C)The year 1 net income to be overstated and Year 2 net income will be correct. d)The year 1 net income to be overstated and Year 2 net income to be understated. e)None of the aboveAn understatement of ending inventory in the year 20-1 will cause the owners equity account at the end of the year 20-2, assuming no other errors, to be (a) understated. (b) correctly stated. (c) overstated. (d) none of the above.Which of the following financial statements would be impacted by a current-year ending inventory error, when using a periodic inventory updating system? A. balance sheet B. income statement C. neither statement D. both statements
- An overstatement of ending inventory in the year 20-1 will cause net income to be overstated in the year 20-1.If a group of inventory items costing $3,200 had been double counted during the year-end inventory count, what impact would the error have on the following inventory calculations? Indicate the effect (and amount) as either (a) none, (b) understated $______, or (c) overstated $______. Table 10.2If ending inventory is overstated in the current fiscal year, what effect will this have on net income for the next fiscal year? a.Net income would be understated. b.Net income would only be affected in the current fiscal year, and it would be understated. c.There would be no effect on net income. d.Net income would be overstated.
