Question
14. Rosegardens Ltd. just commenced operations in the current period and believes an error [not classifying as an inventoriable cost ] has been made when
14. Rosegardens Ltd. just commenced operations in the current period and believes an error [not classifying as an inventoriable cost ] has been made when classifying its costs into inventoriable vs non-inventoriable costs. Fortunately, the error only involved one cost item: the electricity cost of its head-office. Some of the company's inventory remained unsold at the end of the current year.
Which of the following statements represents the most likely impact of this error on Rosegardens inventory balance in $ on its balance sheet at the end of the current period (compared to its inventory balance in $ on its balance sheet at the end of the current period if it did not make the error)?
Group of answer choices
The error will correct itself in the next period
No error has been made
The error has caused the inventory balance to be understated at the end of the current period.
The error has caused the inventory balance to be overstated at the end of the current period
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