A couple Accounting for Inventories questions:

1.

The rate of inflation in Canada as announced by Stats Canada is 3.8% this year. Hader Company is desperately short of cash. If Hader wished to reduce the taxes it paid Canada Revenue Agency this year by deliberating understating its net income then when counting its ending inventory at year end it would:

Understate its ending inventory and overstate its opening inventory by the same amount

Not bother to do either since neither would impact the bottom line (reported net income)

Overstate the true quantity of its ending inventory

Understate the true quantity of its ending inventory

One of the above

2.

A company makes silly clerical errors and in the annual financial statements for the year ended December 31, 2010 understates it beginning inventory for the year by $5,000 and in the same accounting period overstates its ending inventory by $9,000. As a result of these two errors, Cost of Goods Sold reported in the 2010 Income Statement will be:

overstated by $9,000

understated by $14,000

overstated by $5,000

understated by $9,000

none of the above