QUESTION $15$

Ruiz, Inc. has had some turnover in its parts inventory area. As a result, some inventory counting errors have been made in taking the physical ending inventory in the last two fiscal years. Its financial statements for the years $2026$ and $2025$ contained errors as follows: Ending inventory is overstated $$32,000$ in $2025$ and understated $$4,000$ in $2026.$

Charlie has a $\frac{9}{30}$ fiscal year$-$end. Assume that no correcting entries were made and that no additional errors occurred in fiscal $2027.$ Ignoring income taxes, by how much will working capital be overstated or understated at $9/30/26?$

$$4,000$ understated

$$36,000$ understated.

$$4,000$ overstated

$$32,000$ overstated