Question: In its physical inventory count at its March 31, 2017, year end, Backspring Corporation excluded inventory that was being held on consignment for Backspring by

In its physical inventory count at its March 31, 2017, year end, Backspring excluded inventory that was being held on consignment for Backspring by another company. As a result, the company's inventory count showed the company having less inventory than its accounting records indicated it should have. The company adjusted its inventory and cost of goods sold accordingly. The merchandise was sold in the next year and the inventory was correctly stated at March 31, 2018.
Instructions
Ignoring income tax, indicate the effect of this error (overstated, understated, or no effect) on each of the following at year end:

2018 2017 (a) Cash (b) Cost of goods sold (c) Net income (d) Retained earnings (e) Ending inventory (f) Gross profit margin (30%) (g) Inventory turnover (8 times)

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