As Bali Imports Inc. was finalizing its 2020 statements, it discovered that an accounting error caused the net income of 2019 to be understated by $10 million. Retained earnings at December 31, 2019, as previously reported, stood at $324 million. Net income for 2020 was $88 million, and 2020 dividends were $48 million.

Required

1. What impact will this prior-period error have on Bali Imports’ 2020 income statement?

2. What is the impact on the 2019 financial statements?