10.The World Company's financial statements for 20X2 and 20X1 contain the following errors:

20X2 20X1 Ending Inventory $ 6,000 overstated $ 16,000 overstated Insurance Expense $ 4,000 understated $ 12,000 overstated

If no correcting entries were made at the end of 20X1, how much will retained earnings be overstated or understated at the end of 20X2? (Ignore income tax.)

Multiple Choice

• $2,000 understated
• $2,000 overstated
• $10,000 understated
• $10,000 overstated