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what is a correcting entry for $150,000 of overstated inventory

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

what is a correcting entry for $150,000 of overstated inventory

Expert Solution

Step 1

The overstatement of the inventory would mean that the inventory (assumed ending inventory) is stated more at the end of the year. It would understate the cost of goods sold and also would overstate the income of the firm. Hence, the cost of goods sold is to be increased to correct the error.

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