Final answer:
A $50,000 overstatement of last year's inventory will cause the current year's ending retained earnings balance to be overstated by $50,000.
Step-by-step explanation:
The effect of a $50,000 overstatement of last year's inventory on the current year's ending retained earnings balance is that it will be overstated by $50,000.
This is because an overstatement of inventory means that the company has reported more inventory on its balance sheet than it actually possesses. As a result, the ending retained earnings balance, which represents the accumulated profits of the company, will be overstated by the same amount.
For example, if the company had reported an ending retained earnings balance of $500,000 without considering the inventory overstatement, it would need to adjust the balance by subtracting the overstatement amount of $50,000, resulting in a corrected balance of $450,000.