Read and answer the following about Dolan's Company.

A: The failure for Dolan's Company to record a purchase of merchandise on account even though the goods are properly included in the physical inventory results in

a. an overstatement of assets and net income.

b. an understatement of assets and net income.

c. an understatement of cost of goods sold and liabilities and an overstatement of assets.

d. an understatement of liabilities and an overstatement of owners' equity.

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

a. no effect.

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

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

d. net income and current liabilities were overstated.

Please EXPLAIN your answer for both questions.