Kites Inc. placed an order for inventory on December 24, Year One. Inventory was shipped from the supplier on December 26, Year One and arrived at Kites warehouse on January 3, Year Two. The terms of the shipment were FOB shipping point. The company uses a periodic system, and the inventory was not included in the end of the year count. Kites accountant recorded the purchases by debiting purchases and crediting accounts payable on January 3, Year Two. Which of the following is true of Kites financial statements?

Group of answer choices

Liabilities for Year One are understated.

Purchases for Year One are overstated.

Retained earnings for Year Two are understated.

Net income for Year Two is understated.

Ending inventory for Year One is overstated.