Question: (a) Compute the total effect of the errors on 2026 net income. b) Compute the total effect of the errors on the amount of Henning's

Blue Tool Company's December 31 year-end financial statements contained the following errors.

(a) Compute the total effect of the errors on 2026 net income.

b) Compute the total effect of the errors on the amount of Henning's working capital at December

31, 2026.

Blue Tool Company's December 31 year-end financial statements contained the following errors. December 31, 2025 December 31, 2026 Ending inventory $8,800 understated $8,000 overstated Depreciation expense 2,200 understated An insurance premium of $63,300 was prepaid in 2025 covering the years 2025, 2026, and 2027. The entire amount was charged to expense in 2025. In addition, on December 31, 2026, fully depreciated machinery was sold for $16,100 cash, but the entry was not recorded until 2027. There were no other errors during 2025 or 2026, and no corrections have been made for any of the errors. (Ignore income tax considerations.)

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