If Ending Inventory Is Understated by $7,000 in 20X3,and Assuming

Multiple Choice

If ending inventory is understated by $7,000 in 20X3,and assuming a constant 30% tax rate,then what will be the effect on gross profit in 20X3?

A) 20X3 gross profit will be understated by $2,100.
B) 20X3 gross profit will be understated by $4,900.
C) 20X3 gross profit will be overstated by $4,900.
D) 20X3 gross profit will be understated by $7,000.
E) 20X3 gross profit will be overstated by $7,000.