If Period 1 ending inventory is understated, then:
◦ cost of goods sold is understated and net income is overstated in Period 1.
◦ both cost of goods sold and net income are understated in Period 1.
◦ both cost of goods sold and net income are overstated in Period 1.
◦ cost of goods sold is overstated and net income is understated in Period 1.