Concept – Understated, Overstated, or No Effect

For each of these 2021 inventory errors occurring, state the effect of the error on cost of goods sold, net income, and retained earnings using the following notation: understated (U), overstated (O), or no effect (NE). Also, use the following assumptions: the error is not discovered until 2022 and that a periodic inventory system is used. Income taxes can be ignored.

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  • Search Terms: ne ne   o u cost . freight-in . overstatement . understatement 's (ne). (o), (u), , a amount ne and are assume beginning by charges cost determine discovered each earnings earnings . overstatement effect ending error errors following for goods ignore in income income retained income, inventory inventory o inventory u inventory u o o . overstatement is net no not occurring of on or overstated periodic plus purchases purchases o purchases u retained same sold net sold, system taxes. that the understated understated u understatement until used. using
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