Final answer:
When Jones Company understated ending inventory by $52,000, it affects the calculation of Cost of Goods Sold (COGS) and Net Income for 20X8. The COGS will be higher because the actual value of inventory that should have been left at the end of the period was not accounted for, resulting in lower profits.
Step-by-step explanation:
When Jones Company understated ending inventory by $52,000, it means that the value of their ending inventory was recorded as $52,000 less than it actually was. This error affects the calculation of Cost of Goods Sold (COGS) and Net Income for 20X8.
COGS is calculated by subtracting the beginning inventory from the purchases and adding the ending inventory. Since the ending inventory was understated, the COGS will be higher because the actual value of inventory that should have been left at the end of the period was not accounted for. This reduces Net Income because higher COGS means lower profits.
Additionally, the understatement of ending inventory affects the balance sheet as well, as it leads to an understated asset value and an overstated cost of goods sold. This error needs to be corrected to ensure accurate financial reporting.