Asked by Augustine Sarmiento on Mar 10, 2024



An overstatement of reported net income for the current year may result from

A) an overstatement of ending inventory in the previous period
B) an overstatement of ending inventory in the current period
C) failure to record accrued payroll liabilities
D) failure to record expiration of prepaid insurance

Ending Inventory

At the close of an accounting cycle, the valuation of products set for sale, computed by taking the initial inventory, adding the acquisitions, and deducting the cost of goods sold.

Reported Net Income

The final profit figure stated in a company's financial statements, as reported to shareholders and used for earnings per share calculations.

Accrued Payroll

Salaries and wages that have been earned by employees but have not yet been paid by the company.

  • Discover the effects of erroneous inventory valuation on financial statement presentations.

Verified Answer

Anahit Grkikyan

Mar 10, 2024

Final Answer :
Explanation :
Overstatement of ending inventory in the current period will increase the cost of goods sold, which in turn will decrease the expenses and result in an overstatement of net income. The other options either relate to the previous period (option A) or involve understating expenses (options C and D).