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Basic Question 3 of 10
If Beaver Company fails to count a section of its warehouse and thus understates its ending inventory, which of the following would be true?
B. Net income, total assets, and stockholder's equity would all be understated.
C. Total assets would be understated, while net income and stockholder's equity would be overstated.
A. Total assets and net income would be understated, while stockholder's equity would be overstated.
B. Net income, total assets, and stockholder's equity would all be understated.
C. Total assets would be understated, while net income and stockholder's equity would be overstated.
User Contributed Comments 3
| User | Comment |
|---|---|
| cp24 | How could we deduce that the COGS would be overstated without knowing the co's inventory valuation method? Pls. help. Thanks. |
| nike | the inventory method does not matter here: BI + Purchases - COGS = EI. |
| johntan1979 | It's either you assign cost to COGS or Inventory. If Inventory is understated, the opposite is true for COGS, regardless of the inventory method. |
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Learning Outcome Statements
describe the presentation and disclosures relating to inventories and explain issues that analysts should consider when examining a company's inventory disclosures and other sources of information
CFA® 2025 Level I Curriculum, Volume 2, Module 6.