Final answer:
A misstatement in ending inventory will inversely affect the Cost of Goods Sold for a period. To predict the exact misstatement in COGS, the amount and direction of the misstatement in EI must be known.
Step-by-step explanation:
Understanding the relationship between the misstatement in ending inventory (EI) and the misstatement in the Cost of Goods Sold (COGS) for a given period is crucial in the field of accounting. Typically, COGS is calculated by adding purchases to the beginning inventory and then subtracting the ending inventory. Therefore, if there is a misstatement in EI, it will inversely affect the COGS. For example, if EI is overstated, COGS will be understated, since the equation subtracts EI from the sum of beginning inventory and purchases. Conversely, if EI is understated, COGS will be overstated for the period.
To predict the exact misstatement in COGS, one must know the amount and direction (overstated or understated) of the misstatement in EI. However, without specific figures, one cannot precisely calculate the misstatement in COGS. As a general rule, any misstatement in EI will cause an equal but opposite misstatement in COGS.