- CFA Exams
- CFA Exam: Level I 2021
- Study Session 8. Financial Reporting and Analysis (3)
- Reading 25. Inventories
- Subject 2. Inventory Valuation Methods
CFA Practice Question
If there is an overstatement in inventory at year-end, net income will ______
B. be overstated.
C. be understated.
A. not be affected.
B. be overstated.
C. be understated.
Correct Answer: B
An overstatement in ending inventory ---> understated COGS ---> overstated net income.
User Contributed Comments 2
| User | Comment |
|---|---|
| vatsal92 | This is a very good question! |
| choas69 | COGS = Beginning Balance + Purchase - Ending Inventory |