Question

bbers corporation overstated its ending inventory balance by $15,000 in the current year. what impact will this error have on cost of goods sold and gross profit in the current year and following year?

Answer 1

The COGS would appear to be lower than it actually is if closing inventory in the current year were overstated.

What is Ending Inventory?

Ending inventory refers to the quantity of inventory a business has on hand at the conclusion of its fiscal year. On the income statement, you'll see the cost of goods sold, which is used to figure up gross profit. The income statement's gross profit, which is determined by deducting COGS from net sales revenue, is directly impacted by this. The amount of income tax the corporation must pay for the period is consequently influenced by ending inventory valuation. Since net income is directly correlated to cost of goods sold, understating ending inventory will result in an overestimation of net income.

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