Hallam Company?s financial statements show the following. The company recently discovered that in making physical counts of

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Hallam Company?s financial statements show the following. The company recently discovered that in making physical counts of inventory, it had made the following errors: Inventory on December 31, 2017, is overstated by $18,000 and inventory on December 31, 2018, is understated by $26,000.

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Required1. For each key financial statement figure?(a), (b), (c), and (d) above?prepare a table similar to the following to show the adjustments necessary to correct the reported amounts.

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2. What is the error in total net income for the combined three-year period resulting from the inventory errors? Explain.

3. Explain why the overstatement of inventory by $18,000 at the end of 2017 results in an overstatement of equity by the same amount in that year.

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
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