Question: In its physical inventory count at its February 28, 2014, year end, The Orange Sprocket Corporation included inventory that was being held for another company

In its physical inventory count at its February 28, 2014, year end, The Orange Sprocket Corporation included inventory that was being held for another company to sell on consignment. The merchandise was sold in the next year and inventory was correctly stated at February 28, 2015.

Instructions

Ignoring income tax, indicate the effect of this error (overstated, understated, or no effect) on each of the following at year end:

In its physical inventory count at its February 28, 2014,

2015 2014 (a) Cash (b) Cost of goods sold (c) Profit (d) Retained earnings (e) Ending inventory (f) Gross profit margin ratio (40%) (g Inventory turnover ratio (10 times)_

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