Effect of errors in physical inventory Fonda Motorcyde Shop sells motorcycles, ATVs, and other related supplies and accessories. During the taking of its physical inventory on December 31,201, Fonda incorrectly counted its inventory as $368,960 instead of the correct amount of $354,200. Enter all amounts as positive numbers. d. If uncorrected, what would be the effects of the error on the December 31,20Y2, balance sheet? 1. The December 31,20Y2, balance sheet would be correct, since the 20Y1 inventory error reverses itself in 20Y2. 2. In the December 31,20Y2, balance sheet, inventory would be understated. 3. In the December 31,20Y2, balance sheet, inventory would be overstated. 4. In the December 31,20Y2, balance sheet, retained earnings would be understated