Fairfax Inc. began operations on January $1,2019.$ Financial statements for $2019$ and $2020$

contained the following errors:

Dec. $31,2019$ Dec. $31,2020$

Ending inventory $$33,000$ too high $$39,000$ too low

Depreciation

expense

$21,000$ too high $$

Insurance expense $15,000$ too low $15,000$ too high

Prepaid insurance $15,000$ too high $$

In addition, on December $31,2020$ fully depreciated equipment was sold for $$7,200,$ but the

sale was NOT recorded until $2021.$ No corrections have been made for any of the errors.

Ignore income tax considerations.

The total effect of the errors on Fairfax's $2020$ net income is

understated by $$94,200.$

overstated by $$28,800.$

overstated by $$49,800.$

understated by $$61,200.$