During Year 1, Bradley Corporation issued a $20,000 face value discount note to Fidelity Bank. The note had a 6% discount rate and a one-year term to maturity. On December 31, Year 1, Bradley failed to make the year-end adjustment to accrue the related interest. Which of the following summarizes the effect of this error? Multiple Choice Net income for Year 1 is overstated and abilities for Year 1 are overstated Net income for Year 2 is understated and liabilities for Year 1 are understated Net income for Year 1 is understated and liabilities for Year 1 are overstated Net income for Year 1 is understated and net income for Year 2 is overstated