Beginning inventory was overstated by $1,300 while ending inventory was understated by $700 in the same year. The document states that when beginning inventory is overstated and ending inventory is understated in the same year, the net income will be understated by $2,000.

1. Which of the following is correct when, in the same year, beginning inventory is overstated by
$1,300 and ending inventory is understated by $700?
Net income is understated by $600.
Net income is understated by $2,000.
Net income is overstated by $600.
Net income is overstated by $2,000.
Net income is understated by $600.
Net income is understated by $2,000.
Net income is overstated by $600.
Net income is overstated by $2,000.
Solution
Net income is understated by $2,000.
Net income is understated by $2,000.