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A. Cost of goods sold for the period will be understated.
B. Cost of goods sold for the period will be overstated.
C. Net income for the period will be understated.
D. There will be no effect on cost of goods sold or profit for the period.
D. There will be no effect on cost of goods sold or profit for the period.
D. No effect (offsetting effect) to cost of sales, hence no effect to net income.
If goods owned by an entity were not recorded as a purchase and were not counted in ending inventory in error, it means the inventory was not sold and so does not affect the cost of goods sold account and profits as well.
The correct answer is ‘ D ’
