Inventory Errors.

The income statements of Diamond Company for the years ended December 31, 19X1, and 19X2 follow.

19X1

19X2

Net sales

440,000

483,000

Cost of goods sold

Beginning inventory

95,000

109,000

Add: Net purchases

380,000

404,000

Goods available for sale

475,000

513,000

Less: Ending inventory

109,000

127,000

Cost of goods sold

366,000

386,000

Gross profit

74,000

97,000

Operating expenses

58,000

67,000

Net income

16,000

30,000

Diamond uses a periodic inventory system. A detailed review of the accounting records disclosed the following:

a. A review of 19X1 purchase invoices revealed that a clerk had incorrectly recorded a $12,600 purchase as $1,260.

b. A $4,800 purchase was made on December 30, 19X2, terms F.O.B. shipping point. The invoice was not recorded in 19X2 nor were the goods included in the 19X2 ending physical inventory count. Both the goods and invoice were received in early 19X3, with the invoice being recorded at that time.

c. Goods costing $3,000 were accidentally excluded from the 19X1 ending physical inventory count. These goods were sold during 19X2, and all aspects of the sale were properly recorded.

Instructions:

a. Prepare corrected income statements for 19X1 and 19X2.

b. Determine the impact of the preceding errors on the December 31, 19X2, owner’s equity balance.