James Co. received merchandise on consignment. As of December 31, James Co had recorded the transaction as a purchase and included the goods in inventory. The effect of this on its financial statements for December 31 would be:

Group of answer choices:

no effect.

net income, current assets, and current liabilities were overstated.

net income was correct and current assets and current liabilities were overstated.

net income and current liabilities were overstated.