Entity C uses a periodic inventory system and made a data entry error that overstated its purchases in 2024 by entering a purchase twice. This error affects the cost of goods sold (COGS) and net income (NI), leading to COGS being overstated and NI being understated. The document outlines the potential effects of this error based on choices a) through d).

1. Entity C uses a periodic inventory system. It overstated its purchases in 2024 due to a data entry
error (a purchase was entered twice). The effect of this error on 2024s cost of goods sold
(COGS) and net income (NI), respectively are:
A) COGS understated and NI understated
B) COGS overstated and NI overstated
C) COGS overstated and NI understated
D) COGS understated and NI overstated