Q
During the year 2011-2012, the value of closing inventory was overstated by 25,000. Which of the following is true?
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A
A. The cost of goods sold was overstated during 2011-2012 and income will be understated during 2012-2013
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B
B. The income was overstated during 2011-12 and closing inventory will be overstated during 2012-2013
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C
C. The retained earnings was overstated during 2011-2012 and retained earnings will be understated during 2012-2013
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D
D. The cost of goods sold was understated during 2011-2012 but retained earnings will not be affected during 2012-2013
Correct Answer:
C. C. The retained earnings was overstated during 2011-2012 and retained earnings will be understated during 2012-2013
