Pharoah Company's December 31 year-end financial statements contained the following erroors: An insurance premium of $70500 was prepaid in 2020 covering the years 2020,2021 , and 2022. The prepayment was recorded with a dehit to insurance expense. In addition, on December 31,2021 , fully depreciated machinery was sold for $38500 cash, but the sale was not recorded until 2022. There were no other errors during 2021 or 2022 and no corrections have been made for any of the errors. Ignore income tax considerations. What is the total effect of the errors on the balance of Pharoah's retained earnings at December 31,2021 ? Retained earnings understated by $36900 Retained earnings understated by $14100 Retained earnings overstated by $25500 Retained earnings understated by $4000