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The measurement of inventory affects both the balance sheet and the income statement within an accounting O. period. d. The e
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Answer #1

The correct answer is "C".

Reason: Since the error was discovered in 2019 itself before the issuance of financial statements, there is no need to debit or credit retained earnings account. Also since inventory is "overvalued" we will reduce inventory by crediting it and we will book respective expense in cost of goods sold.

Hence following entry would be passed:

Account Title and Explanations Debit Credit
Cost of goods sold               3,200
Inventory          3,200
(Being overvalued inventory corrected)
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