LO8 Exercise 5-13 Inventory Errors EXAMPLE 5-16, 5:17. For each of the following independent situations, fill in the blanks to indicate the effect of the 5-18 error on each of the various financial statement items. Indicate an understatement (U), an over statement (O), or no effect (NE). Assume that each of the companies uses a periodic inventory system. Balance Sheet Income Statement Retained Earnings Cost of Goods Sold Net Income Inventory Error shipping point 1. Goods in transit at year-end are not included in the physical count; they were shipped FOB 2. One section of a warehouse is counted twice during the year-end count of inventory. 3. During the count at year-end, the inventory sheets for one of the stores of a discount retailer are lost