Ending inventory for the current accounting period is overstated by $3,500.What will be effect of this error?

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DWhen ending inventory is overstated, the cost of goods sold (COGS) is understated because COGS is calculated as Beginning Inventory + Purchases - Ending Inventory. This understatement of COGS leads to an overstatement of net income for the current period by the same amount, $3,500, because lower COGS increases gross profit and, consequently, net income. The overstatement of ending inventory does not directly affect the next period's ending inventory; however, the overstatement of net income increases retained earnings, a component of equity, leading to an overstatement of equity at the end of the next accounting period if the error is not corrected.

Ending Inventory for the Current Accounting Period Is Overstated by $3,500.What