The December inventory of Tog Company, based on a physical count, was determined to be $ Included in that count was a shipment of goods received from a supplier at the end of the month that cost $ The purchase was recorded and paid for in Another supplier shipment costing $ was correctly recorded as a purchase in However, the merchandise, shipped FOB shipping point, was not received until and was incorrectly omitted from the physical count. A third purchase, shipped from a supplier FOB shipping point on December did not arrive until January The merchandise, which cost $ was not included in the physical count and the purchase has not yet been recorded.

The company uses a periodic inventory system.

Required:

Determine the correct December inventory balance and, assuming that the errors were discovered after the financial statements were issued, analyze the effect of the errors on cost of goods sold, net income, and retained earnings. Ignore income taxes.

Prepare a journal entry to correct the errors.