If beginning inventory is understated, then: a. goods available for sale will be overstated. b. gross profit will be overstated. c. net income will be understated. d. stockholders' equity will be correct because the error will have been reversed.

If beginning inventory is understated, then: a. goods available for sale will be overstated. b. gross profit will be overstated. c. net income will be understated. d. stockholders' equity will be correct because the error will have been reversed.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

If beginning inventory is understated, then:
a. goods available for sale will be overstated.
b. gross profit will be overstated.
c. net income will be understated.
d. stockholders' equity will be correct because the error will have been reversed.

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Which of the following statements about the use of the FIFO assumption is NOT true? a.The FIFO assumption assigns the more recent purchase costs to the balance sheet inventory asset account. b.The FIFO assumption is not affected by the inventory control method. c.In periods of rising prices it produces a higher profit than LIFO. d.The FIFO assumption produces inventory asset values that are based on older purchase costs.