Question

Sparky's incorrectly included inventory that was on consignment in its ending inventory count. Consequently, the ending inventory was overstated on the balance sheet. Explain how this error will affect this year's income statement. (Check all that apply.)

Answer 1

Net Income will be Overvalued.

Step-by-step explanation:

If closing inventory is overvalued, the cost of sales figure will be undervalued, consequently the gross profit and the net income for the year will be overvalued.