Can someone help me to solve this question with explanation?It is urgent...
I totally don know what is FIFO and LIFO and how to answer the question like this.


Cody Company reports net income of $101,100 in 2010. However, ending inventory was understated $17,890. What is the correct net income for 2010?
:$________________

What effect, if any, will this error have on total assets as reported in the balance sheet at December 31, 2010?

:Total assets in the balance sheet will be Understated by $_______________

You don't need to know FIFO and LIFO to do this. They could have used weighted average method for all we know.

What you do need to understand is that inventory can only go two places: either you sold it or you still have it. When it gets sold, the cost comes out of inventory and goes into cost of goods sold. That reduces the asset and increases the expense.

If ending inventory is understated, that is too low, then the only other place it could have gone to is the expense. And what would that do to net income if that extra amount went to the expense?

That should also answer what happens to your assets.