During the taking of its physical inventory on December 31, 2014, Barry's Bike Shop incorrectly counted Rs Inventory as $205,322.00 instead of the correct amount of $170,234.00. What would be the effect on the balance sheet and income statement? Select the correct answer. assets overstated by $35,088.00 retained earnings understated by $35,088.00 net income statement understated by $35,088.00 assets overstated by $205,322.00 retained earnings understated by $170,234.00 no effect on the income statement assets and retained earnings overstated by $35,088.00 net income overstated by $35,088.00. assets and retained earnings overstated by $170,234.00 net income understated by $205,322.00