Assume that in Year 1, the ending merchandise inventory is overstated by $30,000. If this is the only error in Year 1, fill in the items below, indicating which items will be understated(U), overstated(O), or correctly(C) stated for Year 1.

Ending Merchandise Inventory

The final value of goods available for sale at the end of an accounting period.

Overstated

An accounting term used when the reported value of a financial statement element is higher than its true value.

Understated

Describes an amount reported in financial statements that is less than the true, fair, or actual amount.