During the taking of its physical inventory on December 31, 2014, Barry's Bike Shop incorrectly counted its inventory as $204,672.00 instead of the correct amount of $171,461.00. What would be the effect on the balance sheet and income statement?

Select the correct answer.

assets overstated by $33,211.00 retained earnings understated by $33,211.00 net income statement understated by $33,211.00.

assets overstated by $204,672.00 retained earnings understated by $171,461.00 no effect on the income statement.

assets and retained earnings overstated by $33,211.00 net income overstated by $33,211.00.

assets and retained earnings overstated by $171,461.00 net income understated by $204,672.00.