You have been asked to audit thefinancial statementsof Jackson Company and report on your findings. After examining the beginning and endinginventorycounts and calculations for the current year, you find the following:Beginning inventory is overstated by $3,600.

• Ending inventory is understated by $4,100.

Management of the company wants to know the effect that the errors will have on certain financial statement items.

Required:

Ignoring income taxes, determine the effect that the errors will have on the following:

Ending Inventory: Is the item overstated or understated?

What is the amount of error?

Net Income: Is the item overstated or understated?

What is the amount of error?