Navajo Company’s financial statements show the following. Thecompany recently discovered that in making physical counts ofinventory, it had made the following errors: Inventory on December31, 2016, is understated by $56,000, and inventory on December 31,2017, is overstated by $26,000.
| For Year Ended December 31 | 2016 | 2017 | 2018 |
| (a) | Cost of goods sold | $ | 731,000 | $ | 961,000 | $ | 796,000 |
| (b) | Net income | | 274,000 | | 281,000 | | 256,000 |
| (c) | Total current assets | | 1,253,000 | | 1,366,000 | | 1,236,000 |
| (d) | Total equity | | 1,393,000 | | 1,586,000 | | 1,251,000 |
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1. For each key financial statement figure—(a),(b), (c), and (d) below—prepare a tableto show the adjustments necessary to correct the reported amounts.(Amounts to be deducted must be entered with a minus sign.)
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| | | 2016 | 2017 | 2018 | | Cost of goods sold: | | | | | | Reported amount | | $731,000 | $961,000 | $796,000 | | Adjustments for: | 12/31/2016 error | | | | | 12/31/2017 error | | | | | Corrected amount | | $731,000 | $961,000 | $796,000 | | Net income: | | | | | | Reported amount | | $274,000 | $281,000 | $256,000 | | Adjustments for: | 12/31/2016 error | | | | | 12/31/2017 error | | | | | Corrected amount | | $274,000 | $281,000 | $256,000 | | Total current assets: | | | | | | Reported amount | | $1,253,000 | $1,366,000 | $1,236,000 | | Adjustments for: | 12/31/2016 error | | | | | 12/31/2017 error | | | | | Corrected amount | | $1,253,000 | $1,366,000 | $1,236,000 | | Equity: | | | | | | Reported amount | | $1,393,000 | $1,586,000 | $1,251,000 | | Adjustments for: | 12/31/2016 error | | | | | 12/31/2017 error | | | | | Corrected amount | | $1,393,000 | $1,586,000 | $1,251,000 |
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2. What is the error in total net income forthe combined three-year period resulting from the inventoryerrors?
