Hallam Company€™s financial statements show the following. The company recently discovered that in making physical counts of inventory, it had made the following errors: Inventory on December 31, 2012, is overstated by $ 18,000, and inventory on December 31, 2013, is understated by $ 26,000.

Required
1. For each key financial statement figure €” (a), (b), (c), and (d) above €” prepare a table similar to the following to show the adjustments necessary to correct the reported amounts.

Analysis Component
2. What is the error in total net income for the combined three- year period resulting from the inventory errors? Explain.
3. Explain why the overstatement of inventory by $ 18,000 at the end of 2012 results in an overstatement of equity by the same amount in thatyear.

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ForYear Ended Decernber 31 2012 2013 2014 (a) Cost of goods sold (b) Net income (c) Total current assets (d) Total equity ..$207.200 276.000 277,500 272950 314,000 315,000 346,000 2014 Figure: Reported amount Adjustments for: 12/31/2012 error 2012 2013 error Corrected amount