Question: In its physical inventory count at its March 31, 2011, year end, Backspring Corporation excluded inventory that was being held on consignment for Backspring by

In its physical inventory count at its March 31, 2011, year end, Backspring Corporation excluded inventory that was being held on consignment for Backspring by another company. The merchandise was sold in the next year and the inventory was correctly stated at March 31, 2012.

Instructions

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

(a) Cash at the end of 2011 and 2012

(b) The cost of goods sold for each of 2011 and 2012

(d) Retained earnings at the end of 2011 and 2012

(e) Ending inventory at the end of 2011 and 2012

(f) The gross profit margin for each of 2011 and 2012

(g) The days in inventory ratio for each of 2011 and 2012

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