Abney Ltd. (Abney) is a small manufacturing company. During the fiscal year just ended, a number of errors were made in accounting for inventory. For each of the following errors indicate their effect on the financial statement elements and ratios shown in the table below. Indicate whether the financial statement element or ratio would be overstated (higher than it would have been had the error not occurred), understated (lower than it would have been had the error not occurred), or not affected by the error. Abney uses a periodic inventory control system. The ratios before considering the adjustments are shown in brackets in the following table.

a. Some of the inventory in Abney’s warehouse was not counted during the year-end inventory count.

b. Certain costs that are normally expensed as incurred were included in inventory.

c. The purchase of some inventory on credit was not recorded (both the inventory and the payable) but the inventory was included in the year-end inventory count.

d. Damaged inventory that can’t be sold was included in the year-end inventory balance.

e. Some inventory was included in the inventory count even though it was shipped to a customer before year-end. Revenue is recognized when merchandise is shipped to customers.

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a. b. C. d. e. Net income Cost of Total Owners' Current ratio sales assets equity [1.65] Inventory turnover ratio [4.3] Debt-to- equity ratio [1.25]