QUESTION 7 Friends Co. performed a count of the inventory in their warehouse on December 31st (i.e., year-end), and it totaled $700,000. In addition: 1. On December 26th, Friends Co. shipped inventory of $80,000 to Rachel Co. The inventory was free on board destination. It arrived at Rachel Co.'s warehouse on January 3rd. 2. On December 28th, Friends Co. shipped inventory of $20,000 to Ross Inc. The inventory was free on board shipping point. It arrived at Ross Inc.'s warehouse on January 5th. 3. On January 3rd, Friends Co. received inventory of $35,000 from Monica Co. The inventory was shipped from Monica Co. on December 26th, and it was free on board destination. 4. As of December 31st, Friends Co. had inventory of $20,000 on consignment at Chandler Co.'s warehouse. Also, unrelated to the above transactions: Friends Co. determined that inventory related to Product J in the amount of $15,000 could be replaced at a cost of $10,000 (i.e., due to a newer version of Product J coming out) This inventory (for Product J) is included in the count on December 31st (i.e., part of the $700,000 is $15,000 for Product A). Part A (14 points): What should be the ending balance of Friends Co.'s inventory (i.e., at year-end, December 31) considering all the information above? Show each piece of your calculation, and be sure to calculate the total balance. Part B (4 points): To avoid carry-through errors, assume your answer to Part A is $800,000 (that is, the correct amount of inventory to report on the balance sheet should be $800,000). If Friends Co. did not make the necessary corrections to inventory (i.e., the balance remained at $700,000), what would be the misstatement? That is, what accounts would be misstated, by how much, and in what direction ? Note: your answer will only include two accounts and only one general calculation is necessary