Question

A company’s beginning inventory for 2005 was overstated by $37,000, and the ending
inventory for 2005 was understated by $16,000. The income tax rate for the company is 30%.
These errors will cause the 2006 net income to be
a. Understated by $11,200.
b. Understated by $25,900.
c. Overstated by $11,200.
d. Overstated by $25,900.

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