Question: Entity C uses a periodic inventory system. It understated its ending inventory in 2023 because it did not count goods in a warehouse in Yuma,

Entity C uses a periodic inventory system. It understated its ending inventory in 2023 because it did not count goods in a warehouse in Yuma, Arizona. The effect of this error on 2023's cost of goods sold (COGS) and net income (NI), respectively are:

COGS understated and NI understated

COGS understated and NI overstated

COGS overstated and NI understated

COGS overstated and NI overstated

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