During its first and second years of operations, Lupin Company, a corporation using a periodic inventory system, made undiscovered errors in taking its year-end inventories that overstated year 1 ending inventory by $240,000 and overstated year 2 ending inventory by $180,000.

The combined effect of these errors on reported income is:

elect one:

a. Year 1 Year 2 Year 3 Overstated Understated Understated $240,000 $60,000 $180,000

b. Year 1 Year 2 Year 3 Understated Understated Not affected $240,000 $420,000 ---

c. Year 1 Year 2 Year 3 Overstated Overstated Understated $240,000 $420,000 $180,000

d. Year 1 Year 2 Year 3 Overstated Overstated Not affected $240,000 $180,000 ---