The reported net incomes for the first 2 years of Sandra Gustafson Products, Inc., were as follows: 2025, $147,000; 2026, $185,000. Early in 2027, the following errors were discovered.

1. Depreciation of equipment for 2025 was overstated $17,000.

2. Depreciation of equipment for 2026 was understated $38,500.

3. December 31, 2025, inventory was understated $50,000.

4. December 31, 2026, inventory was overstated $16,200.

Instructions

Prepare the correcting entry necessary when these errors are discovered. Assume that the books are closed. (Ignore income tax considerations.)