True/False Questions 1. An overstatement of ending inventory in the year 20-1 will cause net income to be overstated in the year 20-1. 2. An understatement of ending inventory in the year 20-1 will...

1. An overstatement of ending inventory in the year 20-1 will cause net income to be overstated in the year 20-1.

2. An understatement of ending inventory in the year 20-1 will cause net income to be overstated in the year 20-2, assuming no other errors.

3. Under the perpetual system of accounting for inventory, the current merchandise inventory and the cost of goods sold are not determined until the end of the accounting period when a physical inventory is taken.

4. A fiscal year that starts and ends at the time the stock of goods is normally at its lowest level is

known as a natural business year.

5. If goods are shipped FOB shipping point, the seller pays for the shipping costs.