7. Merchandise inventory at the end of the year was inadvertently overstated. Which of the following statements correctly states the effect of the error on net income, assets, and owner's equity? a. net income is overstated, assets are overstated, owner's equity is understated b. net income is overstated, assets are overstated, owner's equity is overstated c. net income is understated, assets are understated, owner's equity is understated d. net income is understated, assets are understated, owner's equity is overstated 8. lf the cost of an item of inventory is $60 and the current replacement cost is $65, the amount included in inventory according to the lower of cost or market is a. $5 b. $60 c. $65 d. $125