A company's correct ending balance for the inventory account at the end of Year 1 should be $57,000, but the company incorrectly reported it as $43,000. In Year 2, the company correctly recorded its ending balance of the inventory account. Which one of the following is true?

1. Gross profit is overstated by $14,000 in Year 1.

2. Gross profit is overstated by $14,000 in Year 2.

3. Cost of goods sold is understated by $14,000 in Year 1.

4. Gross profit is overstated by $14,000 in Year 1.