McLelland Inc. reported net income of $175,000 for 2019 and $210,000 for 2020. Early in 2020, McLelland

Question:

McLelland Inc. reported net income of $175,000 for 2019 and $210,000 for 2020. Early in 2020, McLelland discovers that the December 31, 2019 ending inventory was overstated by $20,000. For simplicity, ignore taxes.
Required:
1. What is the correct net income for 2019? For 2020?
2. Assuming the error was not corrected, what is the effect on the balance sheet at December 31, 2019? At December 31, 2020?

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