Problem

Effects of inventory error If the ending inventory of a firm is overstated by $50,000, by...

Effects of inventory error If the ending inventory of a firm is overstated by $50,000, by how much and in what direction (overstated or understated) will the firm’s operating income be misstated? (Hint: Use the cost of goods sold model, enter hypothetically “correct” data, and then reflect the effects of the ending inventory error and determine the effect on cost of goods sold.)

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