You have been asked to audit thefinancial statementsof Young Company for two consecutive years After examining the accounting records, you determine the following Ending inventoryin Year 1 is overstated by $7,000 Ending inventory in Year 2 is overstated by $4,300 Required 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 error Net Income Year 2 s the item overstated or understated What is the amount of error

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Question: You have been asked to audit thefinancial statementsof Young 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 Young Company for two consecutive years. After examining the accounting records, you determine the following:Ending inventoryin Year 1 is overstated by $7,000

Ending inventory in Year 2 is overstated by $4,300

Required:

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 error?

Net Income - Year 2: s the item overstated or understated?

What is the amount of error?

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