Accounting MCQ Accounting If a company overstates its ending balance of inventory in year 1 and it records inventory correctly in year 2, which one of the following is true?

If a company overstates its ending balance of inventory in year 1 and it records inventory correctly in year 2, which one of the following is true?

Naim 12:59 Accounting

If a company overstates its ending balance of inventory in year 1 and it records inventory correctly in year 2, which one of the following is true?

A) Net income is overstated in year 2.

B) Cost of goods sold is overstated in year 1.

C) Net income is understated in year 1.

D) Retained earnings is overstated in year 1.

Answer: D

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