Question

You may select more than once answer. An error in the ending inventory balance in Year 1 will also affect:

A) Year 1 cost of goods sold

B) Year 2 cost of goods sold

C) Year 2 ending inventroy

D) Year 2  beginning inventory

Answer 1

Ans:

A) Year 1 cost of goods sold

B) Year 2 cost of goods sold

D) Year 2  beginning inventory

Reasons:

A) Year 1 cost of goods sold : The Current year cost of Goods Sold is computed by deducting ending inventory from Opening Inventory and Purchases made during the year. So if the ending inventory is wrong then the outcome of above computation will be wrong so the Year 1  cost of goods sold i.e. (Current year cost of Goods Sold) will be incorrect.

D) Year 2  beginning inventory: year 2 beginning inventory is equal to year 1 ending inventory. So if wrong inventory calculation is made at end of previous year then current year opening value will be carried on as wrong.

B) Year 2 cost of goods sold: The reason is same as ans q(i.e.  Year 1 cost of goods sold) as wrong carry forward opening inventory value will be resulting in wrong computation of vost of goods sold for year 2.