Do you agree with the following statements? Express your opinion on each statement. An inventory error that causes an understatement (or overstatement) for net income in one accounting period, if not corrected, will cause an overstatement (or understatement) in the next. Since an understatement (overstatement) of one period offsets the overstatement (understatement) in the next, such errors as said to correct themselves. Market usually means replacement cost of inventory when applied in the LMC. Cost of goods available for sale equals the inventory plus cost of sales.

Q: am.402.

A: The objective of the question is to understand the impact of understating ending inventory on the…

Q: What is the effect on net income if a company failed ro record a purchase in transit (FOB shipping…

A: Purchase in transit (FOB shipping point) means that where buyer become the owner of the goods at the…

Q: Why do auditors consider inventory errors pervasive?

A:

Q: If the inventory reported on the statement of financial position is understated, then the net income…

A: The objective of the question is to understand the relationship between the inventory reported on…

Q: How do we record and report inventory shrinkage? Which accounts are affected?

A: Inventory Shrinkage:-When inventory has become less than the actual inventory recorded is known as…

Q: Indicate the effects of inventory errors on the financial statements

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Q: Describe Change in Inventory Method and Inventory Errors.

A: Change in Inventory method:   Inventory change is the difference between the amount of last period's…

Q: Explain the appropriate accounting treatment required when a change in inventory method is made.

A: Definition:   Change in inventory method: Change in inventory method is said to be the difference…

Q: 1, how can assets and liabilities be classified for a more informative balance sheet?

A: Introduction :- A classified balance sheet is a financial statement with classifications like…

Q: The auditor computed inventory turnover and compared it to prior years.  This substantive test…

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Q: Which of the following is an example of a conservative accounting practice? a. Estimate the…

A: Introduction:   Conservative accounting practices refers to the accounting practices which tend to…

Q: Which of the following would cause periodic ending inventory to be overstated?

A: Note - the answer has been provided on the basis of information available in question. If any…

Q: You are testing inventory.  You determined that inventory exists, nothing is missing from inventory,…

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Q: When a company changes its inventory method to LIFO, an exception is made for the way accounting…

A: Explain the difference in the accounting treatment of a change to the LIFO inventory method from…

Q: Describe the effects of misstatement of ending inventory.

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Q: Analysts must recognize that the use of the specific identification method to value inventory has a…

A: The amount, by which the Inventory Level exceeds the Closing Inventory level is referred to as the…

Q: Both the gross profit method and the retail inventory method provide a way to estimate ending…

A: Gross Profit Method: Under this method, the beginning inventory is added to the net purchases during…