Homework Answers
When ending inventory is understated by $10,000, it has the following effects :
1. Cost of goods sold is overstated.
2. Net income is understated.
3. Total assets are understated.
4. Stockholders' equity is u understated.
Hence, when ending inventory is understated by $10,000, cost of goods sold will be overstated by $10,000 and net income will be understated by $10,000.
Correct option is (d)
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