In the Following Questions, Inventory Errors Are Noted for 2018

Essay

In the following questions, inventory errors are noted for 2018. Assume that the errors are not discovered until 2019, and that the company uses a periodic inventory system. Indicate the effect of the error, if any, on the accounts noted in the columns, using the following code:
U = Understated; O = Overstated; NE = No effect

- $\begin{array}{|c|c|c|}\hline {\text { Error }} & \text { Cost of goods sold } & \text { Retained earnings } \\\hline \text { Recorded purchases for } \$ 523,000 \text { that } & & \\\text { should have been } \$ 532,000 . &\\\hline \end{array}$