Garraway Ski Company mistakenly recorded purchases of inventory on account
Garraway Ski Company mistakenly recorded purchases of inventory on account received during the last week of December 2014 as purchases during January of 2015 (this is called a purchases cut- off error ). Garraway uses a periodic inventory system, and ending inventory was correctly counted and reported each year. Assuming that no correction was made in 2014 or 2015, indicate whether each of the following financial statement amounts will be understated, overstated, or correct:
1. Net earnings for 2014.
2. Net earnings for 2015.
3. Retained earnings at December 31, 2014.
4. Retained earnings at December 31, 2015.
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