
College Accounting, Chapters 1-27
23rd Edition
ISBN: 9781337794756
Author: HEINTZ, James A.
Publisher: Cengage Learning,
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Textbook Question
Chapter 13, Problem 1TF
An overstatement of ending inventory in the year 20-1 will cause net income to be overstated in the year 20-1.
Expert Solution & Answer

To determine
Identify whether the given statement is true or false.
Answer to Problem 1TF
An overstatement of ending inventory in the year 20-1 will cause net income to be overstated in the year 20-1 is true.
Explanation of Solution
Inventory error: It is the error to identify a mistake in physical count or in pricing qualities. It is also discovered in same accounting period.
The following table shows the effect of inventory errors:
Serial No | Details | Cost of goods sold | Net income | Retained earnings |
1. | Overstatement of ending inventory | Understated | Overstated | Overstated |
2. | Overstatement of purchases | Overstated | Understated | Understated |
3. | Understatement of beginning inventory | Understated | Overstated | Overstated |
4. | Freight-in charges are understated | Understated | Overstated | Overstated |
5. | Understatement of ending inventory | Overstated | Understated | Understated |
6. | Understatement of purchases | Understated | Overstated | Overstated |
7. | Overstatement of beginning inventory | Overstated | Understated | Understated |
8. | Understatement of purchases plus understatement of ending inventory by the same amount | No effect | No effect | No effect |
Table (1)
Thus, the above table indicates that if ending inventory is overstated in the same year (20-1) then it will cause the net income to be overstated in the same year (20-1).
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Chapter 13 Solutions
College Accounting, Chapters 1-27
Ch. 13 - An overstatement of ending inventory in the year...Ch. 13 - An understatement of ending inventory in the year...Ch. 13 - LO2 Under the perpetual system of accounting for...Ch. 13 - LO3 A fiscal year that starts and ends at the time...Ch. 13 - LO3 If goods are shipped FOB shipping point, the...Ch. 13 - An understatement of ending inventory in the year...Ch. 13 - Prob. 2MCCh. 13 - In rimes of rising prices, the inventory cost...Ch. 13 - In rimes of rising prices, the inventory cost...Ch. 13 - In the application of lower-of-cost-or-market,...
Ch. 13 - LO1 If the ending inventory is overstated by...Ch. 13 - Using the following information, compute the...Ch. 13 - Use the following information to compute cost of...Ch. 13 - Kulsrud Company would like to estimate the current...Ch. 13 - What financial statements are affected by an error...Ch. 13 - What is the main difference between the periodic...Ch. 13 - Is a physical inventory necessary under the...Ch. 13 - Is a physical inventory necessary under the...Ch. 13 - In a period of rising prices, which inventory...Ch. 13 - What two factors are taken into account by the...Ch. 13 - Which inventory method always follows the actual...Ch. 13 - When lower-of-cost-or-market is assigned to the...Ch. 13 - List the three steps followed under the gross...Ch. 13 - List the five steps followed under the retail...Ch. 13 - INVENTORY ERRORS Assume that in year 1, the ending...Ch. 13 - JOURNAL ENTRIESPERIODIC INVENTORY Paul Nasipak...Ch. 13 - JOURNAL ENTRIESPERPETUAL INVENTORY Joan Ziemba...Ch. 13 - ENDING INVENTORY COSTS Sandy Chen owns a small...Ch. 13 - LOWER-OF-COST-OR-MARKET Stalberg Companys...Ch. 13 - SPECIFIC IDENTIFICATION, FIFO, LIFO, AND...Ch. 13 - COST ALLOCATION AND LOWER-OF-COST-OR-MARKET...Ch. 13 - Prob. 8SPACh. 13 - RETAIL INVENTORY METHOD The following information...Ch. 13 - INVENTORY ERRORS Assume that in year 1, the ending...Ch. 13 - JOURNAL ENTRIESPERIODIC INVENTORY Amy Douglas owns...Ch. 13 - JOURNAL ENTRIESPERPETUAL INVENTORY Doreen Woods...Ch. 13 - ENDING INVENTORY COSTS Danny Steele owns a small...Ch. 13 - LOWER-OF-COST-OR-MARKET Bouie Companys beginning...Ch. 13 - SPECIFIC IDENTIFICATION, FIFO, LIFO, AND...Ch. 13 - COST ALLOCATION AND LOWER-OF-COST-OR-MARKET Hall...Ch. 13 - GROSS PROFIT METHOD A flood completely destroyed...Ch. 13 - RETAIL INVENTORY METHOD The following information...Ch. 13 - Hurst Companys beginning inventory and purchases...Ch. 13 - Bhushan Company has been using LIFO for inventory...
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