During 2012, the accountant discovered that the physical inventory at the end of 2011 had been…

EX 7-15 Error in inventory

During 2012, the accountant discovered that the physical inventory at the end of 2011 had been understated by $18,000. Instead of correcting the error, however, the accountant assumed that an $18,000 overstatement of the physical inventory in 2012 would balance out the error.

Are there any flaws in the accountant’s assumption? Explain.

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