Inventory on Dec 31,2004 is understated by 66,000
inventory on dec 31, 2005 is overstated by 30,000

year sold
2004 2005 2006
a.cost of good 715,000 847000 770000
b.net income 220,000 275000 231000
c.total current
assets 1,15,000 1,265,000 1,100,000
d.total equity 1,287,000 1,430,000 1,232,000

for each financial statement a,b,c,d prepare a table similar to the following

figure 2004 2005 2006
reported amount
Adj for error 12/31/04
12/31/05
corrected amount

2. what is the error in total net income for the combined three year period resulting from the inventory errors?

3. Explain why the understatement of inventory by 66,000 at then end of 2004 results in an understatement of equity by the same amount in that year.