13. Which of the following statement(s) is(are)correct? Select all that apply.

Group of answer choices Below:

The ending merchandise inventory for the current year is overstated by $20,000. This will cause the net income to be understated by $20,000.

Reporting inventory at the lower of cost or market is an application of conservatism.

One period's ending merchandise inventory becomes the next period's beginning merchandise inventory. As a result, an error in ending merchandise inventory carries over into the next period. Ending merchandise inventory is subtracted from the cost of goods available for sale in one period and the same amount is added as beginning merchandise inventory in the next period. Therefore, an inventory error cancels out after two periods.

A company discovers that its cost of goods sold is understated by an insignificant amount. It does not need to correct the error because of the conservatism principle.

Operating expense will be affected as a result of an error in performing the physical count of inventory at the end of the accounting period.