Lasky Company purchased a machine on January 3, 1998, at a cost of \(\$ 50,000\). It debited freight and installation charges of \(\$ 10,000\) to Repairs Expense. It recorded straight-line depreciation on the machine in 1998 and 1999 using an estimated life of 10 years and no expected salvage value.

Compute the amount of the error in net income for 1998 and 1999, and state whether net income is understated or overstated.