Problem 16-8 (IAA) Crescendo Company revealed the following errors in the financial statements: 2020 Ending inventory 150,000 overstated Rent expense 200,000 understated 50,000 understated 100,000 overstated 2021 250,000 overstated h250,000 understated c. 450,000 understated 1 150.000 overstated If none of the errors were detected or corrected, what amount should be reported as net effect of the errors on retained earnings on December 31, 2021?

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Inventory Valuation

Before discussing the topic inventory valuation let’s discuss the meaning of inventory. In accounting, inventory is also known as stock. Inventory means all the finished goods, materials, merchandise that a business holds for the purpose of selling it in the market with the motive of earning profit.