Effect of Errors in Physical Inventory Madison River Supply Co. sells canoes, kayaks, whitewater rafts, and other boating supplies. During the taking of its physical inventory on December 31, 2018, Madison incorrectly counted its inventory as $545,000 instead of the correct amount of $555,400. a. State the effects of the error on the December 31, 2018, balance sheet of Madison River Supply. Balance Sheet Items Inventory Current Assets Total Assets Understated/ Overstated Understated Understated Understated Understated Amount Stockholders' Equity b. State the effects of the error on the income statement of Madison River Supply for the year ended December 31, 2018. Income Statement Items Cost of Goods Sold Gross Profit Net Income Overstated/Understated Overstated Understated Understated Amount 1000