You are the controller of Small Toys Inc. Pamela Barnes, the president, recently mentioned to you that she found an error in the 2021 financial statements which she believes has corrected itself. She determined, in discussions with the Purchasing Department, that 2021 ending inventory was overstated by $1 million. Pamela says that the 2022 ending inventory is correct. Thus, she assumes that 2022 income is correct. Pamela says to you, "What happened has happened-there's no point in worrying about it anymore."

Instructions.
You conclude that Pamela is incorrect. Write a brief, tactful memo to Pamela, clarifying the situation. The company uses the periodic inventory system.