1. Chan Pharmacy reported cost of goods sold as follows:

2001 2002

Beginning inventory $ 54,000 $ 64,000

Cost of goods purchased 847,000 891,000

Cost of goods available for sale 901,000 955,000

Ending inventory 64,000 55,000

Cost of goods sold $837,000 $900,000

Chan made two errors:

(1) 2001 ending inventory was overstated by $3,000.

(2) 2002 ending inventory was understated by $9,000.

Instructions: Assuming the errors had not been corrected, indicate the dollar effect that the errors had on the items appearing on the financial statements listed below. Also indicate if the amounts are overstated (O) or understated (U).

2001 2002

Amount Overstated/Understated Amount Overstated/Understated

Total assets $_________ _______ $_________ _______

Cost of Goods sold $_________ _______ $_________ _______

Owners Equity $_________ _______ $_________ _______

income before taxes $_________ _______ $_________ _______