You have been hired as the new controller for the Ralston Company. Shortly after Joining the company In $2024,$ you discover the following errors related to the $2022$ and $2023$ financlal statements:

a$.$ Inventory at $\frac{12}{31}/2022$ was understated by $$7,600.$

b$.$ Inventory at $\frac{12}{31}/2023$ was overstated by $$12,200.$

c$.$ On $\frac{12}{31}/2023,$ Inventory was purchased for $$4,600.$ The company did not record the purchase until the Inventory was pald for early In $2024.$ At that time, the purchase was recorded by a debit to purchases and a credit to cash.

The company uses a perlodic Inventory system.

Requlred:

Assuming that the errors were discovered after the $2023$ financlal statements were issued, analyze the effect of the errors on $2023$ and $2022$ cost of goods sold, net Income, and retained earnings. $($Ignore income taxes.$)$

Prepare a journal entry to correct the errors.

Answer rating: 100% (QA)

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