If the Ending Inventory Is Overstated by $18,000 in 20X3,and

Multiple Choice

If the ending inventory is overstated by $18,000 in 20X3,and assuming a constant 30% tax rate,then what will be the effect on net income in 20X4?

A) Net income will be understated by $5,400 in 20X4.
B) Net income will be overstated by $5,400 in 20X4.
C) Net income will be understated by $12,600 in 20X4.
D) Net income will be overstated by $12,600 in 20X4.
E) Net income will not be overstated or understated in 20X4.