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The inventory at the end of the year was understated by $14,750. (a) Did the error cause an overstatement or an understatement of the gross profit for the year? (b) Which items on the balance sheet at the end of the year were overstated or understated as a result of the error?
Financial Accounting
Solutions
Financial Accounting
The inventory at the end of the year was understated by $14,750. (a) Did the error cause an overstatement or an understatement of the gross profit for the year? (b) Which items on the balance sheet at the end of the year were overstated or understated as a result of the error?
(a)
State any overstatement or understatement of gross profit due to inventory error.
Explanation of Solution
Inventory error: Inventory errors are sometimes caused by making mistake, in physical count, in pricing the inventory correctly, or in recognizing the transfer of title for the goods in transit...
(b)
State any overstatement or understatement of items in balance sheet due to inventory error.
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