The Holdovers Company has a calendar$-$year accounting period. The following error was

discovered in March of $2023,$ long after the financial statements for $2022$ were published. This

error would have affected the financial statements for $2021$ and $2022.$

The ending balance in the inventory had been understated at $12/31/2021$ by

$$500,000.$

INSTRUCTIONS:

$($i$)$ Compute the effect this error had on the $2022$ net income.

$($ii$)$

Compute the effect, if any, each error had on the December $31,2021$ balance

sheet items.

Hint: be very careful about the time period!