At December 31, 2012, Island Equipment understated ending inventory by $2,500. How does this error affect cost

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At December 31, 2012, Island Equipment understated ending inventory by $2,500. How does this error affect cost of goods sold and net income for 2012?

a. Understates costs of goods sold and overstates net income

b. Leaves both cost of goods sold and net income correct because the errors cancel each other

c. Overstates cost of goods sold and understates net income

d. Overstates both cost of goods sold and net income AppendixLO1

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