(a) Guo Company, Ltd. sells three different categories of tools (small, medium, and large). The cost and net realizable value of its inventory of tools are as follows.
_________________________Cost Net Realizable Value
Small.........................HK$ 640,000......................HK$ 730,000
Medium...........................2,900,000..........................2,600,000
Large..............................1,520,000..........................1,485,000
Determine the value of the company's inventory under the lower-of-cost-or-net realizable value approach.
(b) Sun Company, Ltd. understated its 2016 ending inventory by HK$284,000. Determine the impact this error has on ending inventory, cost of goods sold, and equity in 2016 and 2017.