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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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BuyFindarrow_forward

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Errors in Ending Inventory

From time to time, business news will report that the management of a company has misstated its profits by knowingly establishing an incorrect amount for its ending inventory.

Required:

Explain how a misstatement of ending inventory can affect profit.

To determine

Introduction:

Ending inventory is the most effect item at the time of calculate the cost of goods sold.

Ending inventory is the measure of inventory an organization has available toward the finish of its financial year. It is firmly related with ending inventory cost, which is the measure of cash spent to get these products in stock. It ought to be determined at the lower of expense or market.

To choose:

Explain how a misstatement of ending inventory can affect profit.

Explanation

If ending inventory has been shows the higher value then cost of goods sold will be less, and net income will be increased, and next year will vice-versa.

Ending inventory is the measure of inventory an organization has available toward the finish of its financial year. It is firmly related with ending inventory cost, which is the measure of cash spent to get these products in stock. It ought to be determined at the lower of expense or market...

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