It is discovered in 2018 that ending inventory in 2016 was understated. What is the effect of the understatementon the following: 2016: Cost of goods soldNet incomeEnding retained earnings2017: Net purchasesCost of goods soldNet incomeEnding retained earnings

It is discovered in 2018 that ending inventory in 2016 was understated. What is the effect of the understatementon the following: 2016: Cost of goods soldNet incomeEnding retained earnings2017: Net purchasesCost of goods soldNet incomeEnding retained earnings

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

It is discovered in 2018 that ending inventory in 2016 was understated. What is the effect of the understatement
on the following: 2016: Cost of goods sold
Net income
Ending retained earnings
2017: Net purchases
Cost of goods sold
Net income
Ending retained earnings

Definition Definition Remaining net income of the company after the required dividends are paid to shareholders. This surplus money is usually invested back into the business to expand its business operations or launch a new product.

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