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When preparing financial statements on December 31, 2020 the head of accounting accidentally overstated ending inventory by $7,400. What effect does this error have on the following financial statement items? Retained Earnings as of December 31, 2020 Cost of Sales as of December 31, 2020. 1. Overstated 2. Understated Gross Profit as of December 31, 2021. DO 3. No effect Current Assets as of December 31, 2020