Concept – Understated, Overstated, or No Effect
Intermediate Accounting
Spiceland, Nelson, and Thomas
10th Edition
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.