if-a-company-has-an-overstated-ending-inventory-what-is-the-effect-on-cost-of-go

Question

If a company has an overstated ending inventory, what is the effect on cost of goods sold and net income?

Accepted Answer

Cost of goods sold is understated, leading to an overstated net income.

Answer

Cost of goods sold is overstated, leading to an understated net income.

Answer

Both cost of goods sold and net income are overstated.

Answer

Cost of goods sold is unaffected, but net income is understated.