Question: In preparing its financial statements for the current year, a company's closing inventory was understated by $300,000. What will be the effect of this error


In preparing its financial statements for the current year, a company's closing inventory was understated by $300,000.

What will be the effect of this error if it remains uncorrected?

A The current year's profit will be overstated and next year's profit will be understated.

B The current year's profit will be understated but there will be no effect on next year's profit.

C The current year's profit will be understated and next year's profit will be overstated.

D The current year's profit will be overstated but there will be no effect on next year's profit.

(2 marks)

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