Lombardo Lumber Company incorrectly recorded inventory in 2015. Rather than recording ending inventory as $ 500, Lombardo€™s accounting manager entered $ 560, overstating ending inventory by $ 60. An inventory summary for 2015 and 2016 as actually recorded by the company is presented below.

Required
a. Prepare an analysis of this error over the two- year period, recommend any correcting entries required to correct the inventory error, and comment on the effect of the error on gross profit. Assume that Lombardo discovered the error in 2016 before closing the books.
b. What correcting entries are necessary if Lombardo discovered the error in 2017 after closing the books for 2016?

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2015 2016 Beginning Inventory $ 200 Beginning Inventory 560 Purchases Available Ending inventory Cost of Goods Sold 240 Cost of Goods Sold 260 +600 Purchases S800 Available (560 Ending Inventory +600 $1.160 900)