17. On December 31, 2020, the Dumbo Co. took a physical inventory of its merchandise, but inadvertently omitted $3,000 worth of goods stored in a separate location. The effect of this error on its financial statements would be to: a. Understate assets, liabilities and capital on the year-end balance sheet, and understate net income for the year. b. Understate assets and capital on the balance sheet, and overstate net income. c. Understate assets and capital on the balance sheet, but have no effect on net income. d. Understate assets and capital on the balance sheet, and understate net income. e. None of the above.

18. Assume that the inventory error in question #17 above went undiscovered, and that the inventory taken on December 31, 2020 is correctly stated. The effect of the original inventory error on Dumbos 2020 financial statements would be to: a. Have no effect on the balance sheet or net income. b. Overstate net income for the year ended December 31, 2020, but have no effect on assets, liabilities, and capital on the year-end balance sheet. c. Understate assets and capital on the balance sheet, and overstate net income. d. Have no effect on the balance sheet, but understate net income. e. None of the above