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Assume that a company fails to write down its inventory at the end of the year. What is the overall net effect on net income

Assume that a company fails to write down its inventory at the end of the year. What is the overall net effect on net income and the accounting equation resulting from this error?

Net Income

Total Assets

Total Liabilities

Total Owners Equity

A.

Understated

Understated

Understated

No effect

B.

Understated

No effect

Overstated

Understated

C.

Understated

Understated

No effect

Understated

D.

Overstated

Overstated

No effect

Overstated

E.

Overstated

No effect

Understated

Overstated

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