Multiple choice

Under - statement of closing work in progress in the period will

  1. understate cost of goods manufactured in that period

  2. overstate current assets

  3. overstate gross profit from sales in that period

  4. understate net profit in that period
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

When closing work in progress is understated, the cost of goods manufactured is overstated (lower ending WIP means more cost is assigned to production). This higher COGS reduces both gross profit and ultimately net profit for the period. Option D correctly identifies that net profit will be understated.

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