Newcastle Company Has the Following Inventory Data for the Current

Multiple Choice

Newcastle Company has the following inventory data for the current period: Assume that the ending inventory is overstated by $5,000.What is the effect on the current period's net income and on the following period's net income?

A) Net Income this period will be overstated by $5,000 and next period will be understated by $5,000.
B) Net income this period will be understated by $5,000 and next period will be understated by $5,000.
C) Net income this period will be overstated by $5,000,but next period will be correctly stated.
D) Net income this period will be understated by $5,000 and next period will be overstated by $5,000.