During the course of the audit of Nature Sporting Goods for the year ended December 31, 2003, the auditor discovered the following errors (documentation references are in parentheses):

1. The accounts receivable confirmation work revealed one pricing error. The book value of \($12,955.68\) should be \($11,984.00.\) The projected error based on this difference is \($14,465.\) (B-9)

2. Nature Sporting Goods had understated the accrued vacation pay by \($13,000.\) (DD-2)

3. A review of the prior year documentation indicates the following uncorrected errors:

a. Accrued vacation pay was understated by \($9,000\).

b. Sales and accounts receivable were overstated by an estimated \($60,000\) due to cutoff errors.

Required:

Prepare a summary of a possible adjustments schedule like the one in Exhibit 14.4, and draw your conclusion about whether the aggregate effect of these errors is material.

Nature Sporting Goods has made no adjustments to the trial balance numbers shown in Exhibit 14.4. Ignore the errors shown in the exhibit. The income tax rate is 40 percent for the current and prior year.

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EXHIBIT 14.4 Summary of Possible Adjustments W/P Acct Ref No. Nature Sporting Goods Manufacturing Company Summary of Possible Adjustments December 31, 2003 DEBIT (CREDIT) ASSETS LIABILITIES Owners' Pretax Description Current Noncurrent Current Noncurrent Equity Earnings Uncorrected Known Errors B-4 300 Sales 130 Accounts Receivable (972) Pricing error 100 Cash (500) A-1 599 Miscellaneous Expense Unrecorded bank service charge AA-6 599 Miscellaneous Expense 201 Cutoff error-Christmas party invoice Accounts Payable C-1 111 Inventory 400 Cost of Goods Sold 972 500 6,500 (6,500) 5,000 (94,500) Pricing errors H-3 525 Depreciation Expense 155 Accum. Depreciation Understatement of depreciation expense Unknown Projected Errors B-4 300 Sales 130 Accounts Receivable (13,493) Projected pricing errors from sample (5,000) 94,500 13,493