Current Attempt in Progress

Ann M$.$ Martin Company makes the following errors during the current year. $($Evaluate each case independently and assume ending inventory in the following year is correctly stated.$)$

Ending inventory is overstated, but purchases and related accounts payable are recorded correctly.

Both ending inventory and purchases and related accounts payable are understated. $($Assume this purchase was recorded and paid for in the following year.$)$

Ending inventory is correct, but a purchase on account was not recorded. $($Assume this purchase was recorded and paid for in the following year.$)$

Indicate the effect of each of these errors on working capital, current ratio $($assume that the current ratio is greater than $1),$ retained earnings, and net income for the current year and the subsequent year.

$\backslash$table$[[1.$ Current Year,Subsequent Year$],[$Current ratio,$],[$Retained earnings,$]]$

Working capital

Understated

Current ratio

Retained earnings

Net income

Overstated

$3.$ Working capital

Current ratio

Retained earnings

Net income

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