a. If the beginning balance of the Inventory account and the cost of items purchased or made

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a. If the beginning balance of the Inventory account and the cost of items purchased or made during the period are correct, but an error resulted in overstating the firm’s ending inventory balance by $15,000, how would the firm’s cost of goods sold be affected? Explain your answer by drawing T-accounts for the Inventory and Cost of Goods Sold accounts and entering amounts that illustrate the difference between correctly stating and overstating the ending inventory balance.

b. If management wanted to understate profits, would ending inventory be understated
or overstated? Explain your answer.

Ending Inventory
The ending inventory is the amount of inventory that a business is required to present on its balance sheet. It can be calculated using the ending inventory formula                Ending Inventory Formula =...
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Accounting What the Numbers Mean

ISBN: 978-1260565492

12th edition

Authors: David Marshall, Wayne McManus, Daniel Viele

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