What is true when units in ending inventory increase during the year?

What is true when units in ending inventory increase during the year?

There is no relationship between net Income and the costing method. When the number of units in ending inventory increases through the year, which of the following is true? A. Net income is the same for variable and absorption costing.

Which is true if the ending inventory is overstated?

If the ending inventory is overstated, what occurs? It will have the reverse effect on the net income during the next accounting period.

What does inventory at the end of the year mean?

Ending inventory is the total value of goods you have available for sale at the end of an accounting period, like the end of your fiscal year.

Does ending inventory affect net income?

Over a two-year period, misstatements of ending inventory will balance themselves out. For example, an overstatement to ending inventory overstates net income, but next year, since ending inventory becomes beginning inventory, it understates net income.

How does increase in inventory affect profit?

The higher the turnover of the inventory, the higher the cost which can be suppressed so that the greater the profitability of a company. Conversely, if the slower turnover of the inventory, the smaller the profit gain.

Which would result if the current year’s ending inventory is understated in the cost of goods sold calculation?

If ending inventory is understated, then cost of goods sold would be overstated. This results in net income and retained earnings being understated. Likewise, current assets (ending inventory) would be understated due to the omission of merchandise. You just studied 59 terms!