Sampson Ltd. is a wholesaler based in Winnipeg. During the current year, Sampson’s staff made a number of errors related to inventory, which follow.

1. Goods out on consignment with another company were not included in the inventory count. 

2. Goods that were in transit at year end were included in inventory. The goods had been purchased FOB destination.

3. Some obsolete inventory was included in the inventory count.

4. Some goods were missed and not counted during the inventory account.

Required

For each of the above errors, indicate the effect they would have on the financial statements and ratios indicated in the table below. Specifically, indicate whether the error would result in the financial statement element or ratio being overstated, understated, or not affected by the error. Sampson uses a periodic inventory system.

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Retained Current Ratio Inventory Turnover Cost of Sales Gross Margin Inventory Earnings 1. 2. 3. 4. 3. 4.