If inventory is overstated at the end of Year 1, what effect does it have on Year 2s account balances, assuming there is no inventory error in Year 2?

a. Overstating inventory

b. Understating cost of goods sold

c. Overstating net income

d. Overstating beginning retained earnings

If you could explain why the right answer is correct and why the other answers are incorrect, I would really appreciate it. Thank you!