The Ending Merchandise Inventory for the Current Year Is Overstated

Multiple Choice

The ending merchandise inventory for the current year is overstated by $20,000. What effect will this error have on the following year's Net Income?

A) Net income will be overstated by $40,000.
B) Net income will be overstated by $20,000.
C) Net income will be understated by $20,000.
D) Net income will be understated by $40,000.