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Brown Company uses a periodic inventory system and their ending inventory is \$104,000 at the end of the year, but it should be \$100,000. In addition, the company made a purchase of \$23,000 during the year that is incorrectly recorded as \$32,000.

Is the cost of goods sold under or overstated, and by how much at the end of the year?

A

Cost of goods sold is overstated by \$9,000.

B

Cost of goods sold is understated by \$9,000.

C

Cost of goods sold is overstated by \$5,000.

D

Cost of goods sold is understated by \$5,000.

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