SunlandCompany's December 31 year-end financial statements contained the following errors:

Dec. 31, 2020 Dec. 31, 2021

Ending inventory $38500understated $43000overstated

Depreciation expense 9100understated

An insurance premium of $96000was prepaid in 2020 covering the years 2020, 2021, and 2022. The prepayment was recorded with a debit to insurance expense. In addition, on December 31, 2021, fully depreciated machinery was sold for$42500cash, but the sale wasnotrecorded until 2022. There werenoother errors during 2021 or 2022 andnocorrections have been made for any of the errors. Ignore income tax considerations.

What is the total effect of the errors on the balance ofSunland's retained earnings at December 31, 2021?

Retained earnings understated by $22400

Retained earnings overstated by $4500

Retained earnings understated by $54900

Retained earnings understated by $31500