On December 31,2015,Owings Corporation overstates the ending inventory account by $5,000.How will this affect Retained Earnings in the December 31,2016 balance sheet?

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The overstatement of ending inventory in 2015 will cause an overstatement of net income for 2015, which will increase retained earnings. However, in 2016, the beginning inventory will be overstated, leading to an understatement of net income for 2016 by the same amount, thus correcting the retained earnings by the end of 2016.

On December 31,2015,Owings Corporation Overstates the Ending Inventory Account by $5,000.How