Question

If the amount of ending inventory is overstated, the amount ofMultiple Choicenet income will be overstated.total assets will be overstated.retained earnings will be overstated.All of the answers are correct.

Answer 1

Answer:

All of the answers are correct.

Explanation:

The movement in inventory balance is as a result of purchases and sales. The opening and closing balances are so related;

Opening balance + purchases - cost of goods sold = closing balance

Hence overstating the closing balance results in an understatement of cost of goods sold thereby resulting in an overstatement of net income and then retained earning.

Assets are also overstated