Question: For each of the following inventory errors occurring in 2021, determine the effect of the error on 2021?s cost of goods sold, net income, and

For each of the following inventory errors occurring in 2021, determine the effect of the error on 2021?s cost of goods sold, net income, and retained earnings. Assume that the error is not discovered until 2022 and that a periodic inventory system is used. Ignore income taxes.

U = understated O = overstated NE = no effect Retained Earnings

U = understated O = overstated NE = no effect Retained Earnings Cost of Goods Sold Net Income 1. Overstatement of ending inventory 2. Overstatement of purchases 3. Understatement of beginning inventory 4. Freight-in charges are understated 5. Understatement of ending inventory 6. Understatement of purchases 7. Overstatement of beginning inventory 8. Understatement of purchases plus understatement of ending inventory by the same amount

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