Assume that the ending inventory of a merchandising firm is overstated by $40,000.Required:(a)By how...

Question

Assume that the ending inventory of a merchandising firm is overstated by $40,000.

Required:
(a)
By how much and in what direction (overstated or understated) will the firm's cost of goods sold be misstated? (Omit the "$" sign in your response.)

Cost of goods sold understated by $

Robert · Accepted Answer

Cost of goods sold = Opening Stock + Purchases – Closing Stock 
If ending inventory is overstated means cost of goods sold is understated by $40,000.

Assume that the ending inventory of a merchandising firm is overstated by $40,000. Required: (a) By how much and in what direction (overstated or understated) will the firm's cost of goods sold be...

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