Inventory Errors For each of the following independent situations, fi ll in the blanks to indicate the effect of the error on each of the various fi nancial statement items. Indicate an understatement

(U), an overstatement (O), or no effect (NE). Assume that each of the companies uses a periodic inventory system.

Balance Sheet Income Statement Retained Cost of Net Error Inventory Earnings Goods Sold Income 1. Goods in transit at year-end are not included in the physical count; they were shipped FOB shipping point. ________ ________ ________ ________ 2. One section of a warehouse is counted twice during the year-end count of inventory. ________ ________ ________ ________ 3. During the count at year-end, the inventory sheets for one of the stores of a discount retailer are lost. ________ ________ ________ ________ AppendixLO1