Glacier Fishing Gear reported the following amounts for its cost of goods sold and ending inventory:

________________________________    ______2014                        2013

Cost of goods sold………………………….$170,000…………$175,000

ending inventory……………………………...30,000……………30,000

Glacier made two errors: (1) 2013 ending inventory was overstated by $5,500, and (2) 2014 ending inventory was understated by $4,000.

Instructions

(a) Calculate the correct cost of goods sold and ending inventory for each year.

(b) Describe the impact of the errors on profit for 2013 and 2014 and on owner's equity at the end of 2013 and 2014.

(c) Explain why it is important that Glacier Fishing Gear correct these errors as soon as they are discovered.