If Taylor Corp. understates its ending inventory balance for 2017 by $15,500 and it is not corrected, what are the effects on its net income for 2018 and 2017?

Effect on 2018 Net Income

Effect on 2017 Net Income

a.

Understated by $15,500 Overstated by $15,500

b.

Overstated by $15,500 No effect

c.

Understated by $15,500 No effect

d.

Overstated by $15,500 Understated by $15,500