Question
Colman Company reports ending inventory in year 1 of
include:
Year 1 ending inventory is understated and year 1 cost of goods sold is overstated
Year 1 ending inventory is overstated and year 1 cost of goods sold is understated
Year 1 ending inventory is understated and year 1 cost of goods sold is understated
Year 1 ending inventory is overstated and year 1 cost of goods sold is overstated
< Prey
1920
2122
include:
Year 1 ending inventory is understated and year 1 cost of goods sold is overstated
Year 1 ending inventory is overstated and year 1 cost of goods sold is understated
Year 1 ending inventory is understated and year 1 cost of goods sold is understated
Year 1 ending inventory is overstated and year 1 cost of goods sold is overstated
< Prey
1920
2122
Ask by Fuentes Sanders. in the United States
Mar 26,2025
Upstudy AI Solution
Tutor-Verified Answer
Answer
Year 1 ending inventory is overstated and year 1 cost of goods sold is understated.
Solution
- The correct ending inventory should be
, but the company reported . - This means that the ending inventory is overstated by
- Since cost of goods sold (
) is calculated as an overstated ending inventory results in an understated . - Therefore, the effects of the error are:
- Year 1 ending inventory is overstated
- Year 1 cost of goods sold is understated.
Thus, the correct choice is:
Year 1 ending inventory is overstated and year 1 cost of goods sold is understated.
Year 1 ending inventory is overstated and year 1 cost of goods sold is understated.
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In year 1, Colman Company’s reported ending inventory was
One common mistake that companies make in inventory reporting is failing to conduct a physical inventory count regularly. This can lead to discrepancies between actual stock and reported figures, causing problems like over- or understatements in financial statements. Regular inventory audits can help keep this in check and ensure your financials reflect reality—nobody wants an embarrassing report on their hands!
