COLLEGE ACCT.,CHAP.1-27-ACCESS >CUSTOM<
22nd Edition
ISBN: 9781337253499
Author: HEINTZ
Publisher: Cengage Learning
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Textbook Question
Chapter 13, Problem 1TF
An overstatement of ending inventory in the year 20-1 will cause net income to be overstated in the year 20-1.
Expert Solution & Answer
To determine
Identify whether the given statement is true or false.
Answer to Problem 1TF
An overstatement of ending inventory in the year 20-1 will cause net income to be overstated in the year 20-1 is true.
Explanation of Solution
Inventory error: It is the error to identify a mistake in physical count or in pricing qualities. It is also discovered in same accounting period.
The following table shows the effect of inventory errors:
| Serial No | Details | Cost of goods sold | Net income | Retained earnings |
|
1. | Overstatement of ending inventory | Understated | Overstated | Overstated |
| 2. | Overstatement of purchases | Overstated | Understated | Understated |
| 3. | Understatement of beginning inventory | Understated | Overstated | Overstated |
| 4. | Freight-in charges are understated | Understated | Overstated | Overstated |
| 5. | Understatement of ending inventory | Overstated | Understated | Understated |
| 6. | Understatement of purchases | Understated | Overstated | Overstated |
| 7. | Overstatement of beginning inventory | Overstated | Understated | Understated |
| 8. | Understatement of purchases plus understatement of ending inventory by the same amount | No effect | No effect | No effect |
Table (1)
Thus, the above table indicates that if ending inventory is overstated in the same year (20-1) then it will cause the net income to be overstated in the same year (20-1).
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Students have asked these similar questions
If 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.
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)
If the ending inventory is overstated in the current year:
Net income will be understated in the current year.
Next year's beginning inventory will also be overstated.
Next year's net income will be overstated.
Next year's beginning inventory will be understated.
Chapter 13 Solutions
COLLEGE ACCT.,CHAP.1-27-ACCESS >CUSTOM<
Ch. 13 - An overstatement of ending inventory in the year...Ch. 13 - An understatement of ending inventory in the year...Ch. 13 - LO2 Under the perpetual system of accounting for...Ch. 13 - LO3 A fiscal year that starts and ends at the time...Ch. 13 - LO3 If goods are shipped FOB shipping point, the...Ch. 13 - An understatement of ending inventory in the year...Ch. 13 - Prob. 2MCCh. 13 - In rimes of rising prices, the inventory cost...Ch. 13 - In rimes of rising prices, the inventory cost...Ch. 13 - In the application of lower-of-cost-or-market,...
Ch. 13 - LO1 If the ending inventory is overstated by...Ch. 13 - Using the following information, compute the...Ch. 13 - Use the following information to compute cost of...Ch. 13 - Kulsrud Company would like to estimate the current...Ch. 13 - What financial statements are affected by an error...Ch. 13 - What is the main difference between the periodic...Ch. 13 - Is a physical inventory necessary under the...Ch. 13 - Is a physical inventory necessary under the...Ch. 13 - In a period of rising prices, which inventory...Ch. 13 - What two factors are taken into account by the...Ch. 13 - Which inventory method always follows the actual...Ch. 13 - When lower-of-cost-or-market is assigned to the...Ch. 13 - List the three steps followed under the gross...Ch. 13 - List the five steps followed under the retail...Ch. 13 - INVENTORY ERRORS Assume that in year 1, the ending...Ch. 13 - JOURNAL ENTRIESPERIODIC INVENTORY Paul Nasipak...Ch. 13 - JOURNAL ENTRIESPERPETUAL INVENTORY Joan Ziemba...Ch. 13 - ENDING INVENTORY COSTS Sandy Chen owns a small...Ch. 13 - LOWER-OF-COST-OR-MARKET Stalberg Companys...Ch. 13 - SPECIFIC IDENTIFICATION, FIFO, LIFO, AND...Ch. 13 - COST ALLOCATION AND LOWER-OF-COST-OR-MARKET...Ch. 13 - Prob. 8SPACh. 13 - RETAIL INVENTORY METHOD The following information...Ch. 13 - INVENTORY ERRORS Assume that in year 1, the ending...Ch. 13 - JOURNAL ENTRIESPERIODIC INVENTORY Amy Douglas owns...Ch. 13 - JOURNAL ENTRIESPERPETUAL INVENTORY Doreen Woods...Ch. 13 - ENDING INVENTORY COSTS Danny Steele owns a small...Ch. 13 - LOWER-OF-COST-OR-MARKET Bouie Companys beginning...Ch. 13 - SPECIFIC IDENTIFICATION, FIFO, LIFO, AND...Ch. 13 - COST ALLOCATION AND LOWER-OF-COST-OR-MARKET Hall...Ch. 13 - GROSS PROFIT METHOD A flood completely destroyed...Ch. 13 - RETAIL INVENTORY METHOD The following information...Ch. 13 - Hurst Companys beginning inventory and purchases...Ch. 13 - Bhushan Company has been using LIFO for inventory...
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