Explain the impact of errors for 2021 profit

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In 2020, Cost of Goods sold is $270,000. The Ending Inventory is $55,200. In 2021, Cost of Goods sold is $287,500. The Ending Inventory is $55,200.

Errors were made in each year as follows: in 2020, ending inventory was overstated by $11,000 while in 2021, ending inventory was understated by $6,900. Explain the impact of these errors for 2021 profit and owners' equity.

Profits will be _______(overstated/understated) by $ ________

Owners' equity will be _______(overstated/understated) by $ ________

Reference no: EM132419816

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