during the taking of a physical inventory on Dec 31, inventory was counted as $100,780 instead of the correct amount of $100.870. The effec of the error of the December 31 balance sheet and income statement will be a. retained earning will be understated:gross profit will be overstated. b. merchandise inventory will be overstated; cost of merchandise sold will be overstated. c. total assets will be overstated; net income will be understated. d. retained earning will be understated; cost of merchandise sold will be overstated