Question: You have been asked to audit thefinancial statementsof Taylor Company for two consecutive years. After examining the accounting records, you determine the following:Ending inventoryin Year

  • You have been asked to audit thefinancial statementsof Taylor Company for two consecutive years. After examining the accounting records, you determine the following:Ending inventoryin Year 1 is overstated by $12,100
  • Ending inventory in Year 2 is understated by $12,200

Ignoring income taxes, what effect will the errors have onnet incomefor each of Year 1 and Year 2?

Net Income year 1: Is the item overstated or understated? what is the amount of the error?

Net Income year 2: Is the item overstated or understated? what is the amount of the error?

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