Assume that Whitby purchased goods for $2,000 from a local supplier on December 2020 with terms F.O.B. shipping point. The merchandise had not arrived at the company's warehouse until January 2, 2021, and was not included in the inventory count at year end. What effect would this error have on the company's cost of sales and net earnings for 2020? The company's income tax rate is 40 percent.

A. Understated by $2,000 Overstated by $1,200 B. Overstated by $2,000 Understated by $1,200 C. Understated by $2,000 Overstated by $800 D. Overstated by $2,000 Understated by $800

Use the following information to answers questions 10 to 16: Whitby Inc. is a wholesaler that uses a perpetual inventory system. The company's accounting records provided the following transactions for Product B during the fiscal year ended on December 31, 2020. Sale Price Unit Cost $ 9 Date March 5 June 15 September 19 November 20 Transactions Purchase Sale Purchase Sale Units 19,000 10,000 8,000 16,000 $27 11 30