USE THE FOLLOWING INFORMATION TO ANSWER THE NEXT (5) QUESTIONS:

The PhoenixCompany reported income before taxes of $370,000 for 20x1 and ending inventory at December 31, 20x1 of $170,000.Phoenix uses theperiodicinventory system.A later audit produced the following information:

(a)Merchandise costing $17,500 was shipped to Phoenix with terms FOB shipping point on December 26, 20x1.The purchase wasnotrecorded in20x1 and the merchandise wasexcludedfrom the ending inventory because it was not in the warehouse at year end.Phoenix received the goods on January 4, 20x2.

(b)On December 28, 20x1, merchandise costing $29,000 was sold to Deluxe Ltd.Deluxe had asked Phoenix to keep the merchandise until they could come and pick it up.Because the merchandise was still on the loading dock waiting for pick up at year-end, the merchandisewas includedin the inventory count.Phoenix has a mark-up on cost of 60%.No sale was recorded as of December 31st.

(c)Phoenix sold merchandise to Sun Devil, Inc. on December 30, 20x1 for a selling price of $50,000 and termsFOB Destination.Mark up on cost for this type of merchandise is 60%.Phoenix recorded the sale on December 30thwhen they placed the goods on the common carrier.The goods wereexcludedfrom the physical count at year-end because they were not in the warehouse.They were still in transit at December 31, 20x1.

1.Determine the effect of these errors on Phoenix's financial statements as of December 31, 20x1.Use O for overstated, U for understated, or NE for No Effect.

If there is an effect, state the dollar amount.State the over/understatement first, followed by the dollar amount.Do not space between the O/U/NE and the dollar amount.For example, if Assets are understated by $7,000, record your answer at U7000.

1. a. Based on your analysis of all three transactions, determine the overall effect onAssetsas of December 31, 2017: $[Blank_3]

2. Using the information presented in #2 above, determine the overall effect on Liabilities as of December 31, 2017:$[Blank_4]

3. Using the information presented in #2 above, determine the overall effect on Stockholder's Equity as of December 31, 2017:$[Blank_5]

4. Using the information presented in #2 above, Determine thecorrect ending inventoryPhoenix Company should report on their year end balance sheet dated December 31, 2017. (*Phoenix was originally reporting ending inventory at $170,000.)$[Blank_6]