For each of the following inventory errors occurring in 2011, determine the effect of the error on 2011's cost of goods sold, net income, and retained earnings. Assume that the error is not discovered until 2012 and that a periodic inventory system is used. Ignore income taxes.

U = Understand

O = Overstated

NE = No Effect

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Retained Earnings Cost of Net Goods Sold Income 1. Overstatement of ending inventory 2. Overstatement of purchases 3. Understatement of beginning inventory 4. Freight-in charges are understated 5. Understatement of ending inventory 6. Understatement of purchases 7. Overstatement of beginning inventory 8. Understatement of purchases plus understatement of ending inventory by the same amount