For year 1, beginning inventory was incorrect but ending inventory was correct. This error had the following impact on year 2:

Select one:

a.

cost of goods sold to be overstated and net income to be understated.

b.

cost of goods sold to be understated and net income to be understated.

c.

cost of goods sold to be overstated and net income to be overstated.

d.

cost of goods sold to be understated and net income to be overstated.

e.

cost of goods sold and net income would be correct.