Navajo Companys year-end financial statements show the following. The company recently discovered that in making physical counts of inventory, it had made the following errors: Year 1 ending inventory is understated by $50,000 and Year 2 ending inventory is overstated by $20,000.

For Year Ended December 31		Year 1		Year 2		Year 3
(a)	Cost of goods sold	$	725,000	$	955,000	$	790,000
(b)	Net income		268,000		275,000		250,000
(c)	Total current assets		1,247,000		1,360,000		1,230,000
(d)	Total equity		1,387,000		1,580,000		1,245,000

Required: 1. For each key financial statement figure(a), (b), (c), and (d) aboveprepare a table to show the adjustments necessary to correct the reported amounts. 2. What is the total error in combined net income for the three-year period resulting from the inventory errors?

		Year 1	Year 2	Year 3
Cost of goods sold:
Reported amount
Adjustments for:	12/31/Year 1 error
	12/31/Year 2 error
Corrected amount
Net income:
Reported amount
Adjustments for:	12/31/Year 1 error
	12/31/Year 2 error
Corrected amount
Total current assets:
Reported amount
Adjustments for:	12/31/Year 1 error
	12/31/Year 2 error
Corrected amount
Equity:
Reported amount
Adjustments for:	12/31/Year 1 error
	12/31/Year 2 error
Corrected amount

What is the error in total net income for the combined three-year period resulting from the inventory errors?

Error in total net income of three years

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