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one of the trickier topics in inventory which is part of far is to understand what happens when inventory is understated or overstated the exam loves to ask questions like if the company were to understate inventory whats the impact to net income after making the adjustment so that is what this template is going to help us do and this is really applicable to when a company uses the periodic method meaning what they do at the end of the year is they count their ending inventory and they would say in this case its 30 000. so they could use this inventory roll forward which uses the base method to figure out what cost of goods sold is right we know our beginning inventory we know inventory purchases so that means we know cost of goods available for sale and if we know ending inventory then cost of goods sold is the plug so lets say that the company says well our ending inventory balance is 30 000. now what were gonna do is show what happens when they actually need to make an adjustmen