Part II.In reviewing the accounts in 2014 after the books for the prior year have been closed, you find that the following errors have been made in summarizing activities:

201120122013

Overstatement of ending inventory$42,000$51,000$29,000

Understatement of accrued advertising expense6,60012,0007,200

In addition, during the 2014 year-end audit, the following items come to your attention:

Dyke bought equipment on January 1, 2011 for $294,000 with a $24,000 estimated salvage value and a six-year life. The company debited an expense account and credited cash on the purchase date for the entire cost of the asset. (Straight-line method)

(a) Prepare the journal entries necessary at December 31, 2014, to record the above corrections and changes (ignore tax effects).

• Inventory:
• Accrued Advertising expense:
• Depreciation expense:

(b) Compute the total effect of the errors on 2014 net income (show your works).