Pinilih Corporation had $580,000 in inventory which was based on a physical count at December 31, year 1. The Inventory was priced at cost. In February year 2, it was determined that the inventory was overstated by $50.000. Indicate the effects of the inventory overstatement in the year 1 and year 2 financial statements by completing the following table. Mark each item overstate, understate, or OK!

Year 1 Effects Year 2 Effects Overstate Understate OK Overstate Understate OK Inventory on balance sheet Cost of goods sold Net income Retained earnings