Question $6$

If$,$ at the end of a period, a company erroneously excluded some

goods from its ending inventory and also erroneously did not record

the purchase of these goods in its accounting records, these errors

would cause. $($Assume that the omitted purchase was a purchase of

merchandise on account.$)$

The ending inventory and retained earnings to be understated

No effect on net income and retained earnings

The ending inventory, cost of goods sold, and retained earnings to be

understated

Cost of goods sold and net income to be understated