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 $56,000 and Year 2 ending inventory is overstated by $26,000.

For Year Ended December 31	Year 1	Year 2	Year 3
(a) Cost of goods sold	$ 731,000	$ 961,000	$ 796,000
(b) Net income	274,000	281,000	256,000
(c) Total current assets	1,253,000	1,366,000	1,236,000
(d) Total equity	1,393,000	1,586,000	1,251,000

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?

For each key financial statement figure(a), (b), (c), and (d) aboveprepare a table to show the adjustments necessary to correct the reported amounts. (Amounts to be deducted must be entered with a minus sign.)

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

Required 1

Required 2

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

Error in total net income of three years