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Financial Accounting

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Inventory Errors: Brown Company

FINACT-VYB7RB

Brown Company's ending inventory is presented as \$104,000 on the balance sheet at the end of the year, but the balance incorrectly includes inventory held on consignment from another company and should be presented as \$100,000. In addition, the company made a purchase of \$23,000 during the year that is incorrectly recorded as \$32,000.

By how much is the cost of goods sold understated or overstated at the end of the period?

A

Cost of goods sold is understated by \$1,500.

B

Cost of goods sold is overstated by \$1,500.

C

Cost of goods sold is understated by \$8,500.

D

Cost of goods sold is overstated by \$8,500.