Hallam Companys year-end financial statements show the following. The company recently discovered that in making physical counts

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Hallam Company’s year-end financial statements show the following.
The company recently discovered that in making physical counts of inventory, it had made the following errors: Year 1 ending inventory is overstated by $18,000 and Year 2 ending inventory is understated by $26,000.

For Year Ended December 31 (a) Cost of goods sold...... Net income... (b) (c) Total current assets (d) Total

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.

Figure: Reported amount ******* Adjustments for: Year 1 error.... Year 2 error.... Corrected amount Year 1

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

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