If you are going for the gold. Review the effects of inventory errors.

you can go through following information and answer the question asked above:

Inventory errors tend to be counterbalancing For the two consecutive years, the total income would be correct However, the amount for each year is wrong.

One years ending inventory error becomes the next years beginning inventory error

Overstatements of beginning inventory generally cause that years income to be understated Understatements of beginning inventory generally cause

effects of inventory errors:

balance sheet side effects:

understate ending inventory: asset: understated , equity: understated

overstate ending inventory: asset : overstated , equity : overstated