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You have been hired as the new controller for the Ralston Company. Shortly after joining the company In 2018, you discover the following errors related to the 2016 and 2017 financial statements: a. Inventory at 12/31/2016 was understated by $7,800. b. Inventory at 12/31/2017 was overstated by $12,600. c. On 12/31/2017, Inventory was purchased for $4,800. The company did not record the purchase until the Inventory was paid for early In 2018. At that time, the purchase was recorded by a debit to purchases and a credit to cash. The company uses a periodic Inventory system. Required: 1. Assuming that the errors were discovered after the 2017 financial statements were issued, analyze the effect of the errors on 2017 and 2016 cost of goods sold, net Income, and retained earnings. (Ignore Income taxes.) 2. Prepare a Journal entry to correct the errors. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Assuming that the errors were discovered after the 2017 financial statements were issued, analyze the effect of the errors on 2017 and 2016 cost of goods sold, net income, and retained earnings. (Ignore income taxes.) (Indicate the effect by selecting "O" for Overstated, "U" for Understated and "NE" for No effect. Input all values as positive amounts. Be certain to enter zero wherever needed.) 2017 2016 Beginning inventory Plus: Net purchases Less: Ending inventory Cost of goods sold Beginning inventory Plus: Net purchases Less: Ending inventory Cost of goods sold Revenues Less: Cost of goods sold Less: Other expenses Net income Revenues Less: Cost of goods sold Less: Other expenses Net income Retained earnings Retained earnings Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare a journal entry to correct the errors. (If no entry is required for a transaction/event, select "No journal entry required in the first account field.) View transaction list Journal entry worksheet