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Assume that the amount of ending inventory is overstated in Year 1. Further assume the...

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Accounting

Assume that the amount of ending inventory is overstated in Year 1. Further assume the overstatement in Year 1 is not discovered and the ending inventory in Year 2 is reported accurately. Under these circumstances,

A: cost of goods sold in Year 2 will be understated.

B: total assets in Year 2 will be understated.

C: the Year 2 ending balance in retained earnings will be accurate.

D: none of the answers are correct.

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