How would the overstatement of inventory affect liabilities?

This week the course designers gave us one big question to answer.  Its easier to answer, however, as a whole bunch of easy little questions.  This week, fortunately, we dont need any financial statements or web links to answer the easy little questions. 

To make sure youve answered each question and that I can quickly see that youve answered each question, please label (number and letter) your answers as follows.  I recommend that you just copy the questions and paste them into your answer and use them to make sure youve answered each little piece of this weeks discussion question:

1a.  How would the overstatement of inventory affect assets?  (Which specific asset would it affect and in which direction?)

1b. How would the understatement of inventory affect assets?  (Which specific asset would it affect and in which direction?)

2a. How would the overstatement of inventory affect liabilities?

2b. How would the understatement of inventory affect liabilities?

3a. How would the overstatement of inventory affect a permanent owners equity account?  (Which specific owners equity account would it affect and in which direction?)

3b. How would the understatement of inventory affect a permanent owners equity account?  (Which specific owners equity account would it affect and in which direction?)

Hint:  For each question be sure to say whether the inventory error (overstatement or understatement) would increase or decrease the accounting element, or have no impact at all.  If the error would increase or decrease the element, be sure to say which specific account the error increases or decreases.  For Question 1a, for instance, you might say something like, An overstatement of inventory increases assets, specifically the Merchandise Inventory account. 

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