A company uses the periodic inventory method. If beginning inventory is understated by $10,000 because the prior’s year’s ending

Question

3 years ago

13

A company uses the periodic inventory method. If beginning inventory is understated by $10,000 because the prior’s year’s ending

inventory was understated by $10,000. The company’s ending inventory for this period is correct. The effect of this error in the current period is that (i) cost of goods sold is ___________ and (ii) net income is __________.a. (i) Overstated and (ii) Overstatedb. (i) Understated and (ii) Understatedc. (i) Overstated and (ii) Understatedd. None of thesee. (i) Understated and (ii) Overstated

Business

1 answer:

Ratling [72] · Answer 1 · 2022-06-10T18:12:53+03:00

Ratling [72]3 years ago

3 0

Answer: Understated and Overstated

Explanation:

Cost of good sold is the addition of Opening stock to the purchases and subtracting closing stock, the omission of $10,000 will reduce it. Invariably a reduction in cost of sales will overstate income.