If ending inventory for the year is overstated, owner's equity reported on the balance sheet at the end of the year is understated.

Name: If ending inventory for the year is overstated, owner's equity reported on the balance sheet at the end of the year is understated.
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If ending inventory is overstated, cost of goods sold will be understated, leading to overstated net income, which in turn causes owner's equity to be overstated, not understated.

If Ending Inventory for the Year Is Overstated, Owner's Equity