E8.7 (LO 3) (Inventory ErrorsPeriodic) Salamander Limited makes the following errors during the current year. Each error is an independent case.

1. Ending inventory is overstated by $1,020, but purchases are recorded correctly. 2. Both ending inventory and a purchase on account are understated by the same amount. (Assume this purchase of $1,500 was recorded in the following year.) 3. Ending inventory is correct, but a purchase on account was not recorded. (Assume this purchase of $850 was recorded in the following year.) Instructions Show the effect of each error on working capital, current ratio (assume that the current ratio is greater than 1), retained earnings, and net income for the current year and the following year.