Problem 16-14 (AICPA Adapted) Emma Company revealed the following errors in the financial statements: December 31, 2019 inventory understated December 31, 2020 inventory overstated Depreciation for 2019 overstated December 31, 2020 accrued rent income overstated December 31, 2020 accrued salaries understated 500,000 800,000 Ungarn 250,000 (1) 300,000 150,000 The understatement of the 2019 ending inventory pertains to goods in transit purchased FOB shipping point which were not recorded in 2019 but paid in 2020. On December 31, 2020, fully depreciated machinery was sold for P100,000 cash but the sale was not recorded until 2021. 1. What is the effect of the errors on net income for 2019? a. 250,000 understated b. 250,000 overstated C. d. 500,000 understated 0 2. What is the effect of the errors on net income for 2020? a. 1,150,000 understated b. 1,150,000 overstated c. 1,250,000 understated d. 1,250,000 overstated 3. What is the effect of the errors on retained earnings on December 31, 2020? a. 1,150,000 understated b. 1,150,000 overstated C. d. 900,000 understated 900,000 overstated