Inventory error see-saw · Lab

AccountingHub Wild · Financial & Managerial Accounting · 2025 release

Overstate this year's ending inventory and watch next year's profit swing back.

Year 1 ending inventory overstated by $2,000

Year 1

Cost of goods sold, reported$60,000

Cost of goods sold, correct$62,000

Gross profit, reported$40,000

Gross profit, correct$38,000

Year 2

Cost of goods sold, reported$58,000

Cost of goods sold, correct$56,000

Gross profit, reported$42,000

Gross profit, correct$44,000

Year 1 profit swing+$2,000

Year 2 profit swing($2,000)

Two-year total$0

Year 1 profit +$2,000 · Year 2 profit ($2,000) · Two-year total correct

Touch the instrument to see what to notice.