Following are descriptions of two independent situations that involve inventory misstatements.
1. Ending merchandise inventory is overstated by $7,500 on December 31, 2006. Ending merchandise inventory is overstated by $10,000 on December 31, 2007.
2. Ending merchandise inventory is understated by $11,000 on December 31, 2006. Ending merchandise inventory is understated by $9,000 on December 31, 2007. For each situation, indicate the effects of the misstatements on the financial statements for 2006 and 2007. Use the following format for youranswers:

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Amount of Misstatement Overstatement (Understatement) 2006 2007 Balance sheet (December 31): Merchandise inventory Current assets Total assets Retained earnings Total stockholders' equity Income statement: Cost of merchandise sold Gross profit Net income