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, 2016, is overstated by $18,000 and inventory on December 31, 2017, is understated by $26,000.

Required
1. 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.

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 2016 results in an overstatement of equity by the same amount in that year.

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For Year Ended December 31 2016 2017 2018 (a) Cost of goods sold (b) Net Income c) Total current assets (d) Total equity $207,200 $213,800 $197,030 175,800 212,270 184,910 276,000 277,500 272,950 314,000 315,000 346,000 Flgure: Reported amount Adjustments for: 12/31/2016 error 2016 2017 2018 12/31/2017 error Corrected amount