Which of the following demonstrates the results of failure to record a purchase of merchandise on account even though the goods are properly included in the physical inventory? Assume the periodic method is used.

overstated net income for year one by $20,000 and year two by $20,000 for a total overstatement of $40,000.

B :

overstated total income by $20,000.

C :

no effect on total net income for the two years.

D :

understated total income by $20,000.

D : a