Reference no: EM132864642

Question - Inventory values in financial statements - During an audit of the inventory records of Willow Ltd for the year ended 30 June 2023, the auditor discovered that the ending inventory balance was overvalued by $54 000. On further investigation, it was discovered as well that the ending inventory for the previous year was correctly counted and valued, but that the inventory balance as at 30 June 2021 was undervalued by $150 000. Spurred on by the concern for errors undetected in previous periods, a thorough investigation was carried out as to the inventory values shown in the company's financial statements during its 5-year history. The following additional errors were detected.

1. As at 30 June 2020, inventory was overvalued by $15 000. 2. As at 30 June 2019, inventory was undervalued by $90 000.

Required

(a) Determine the effects that these errors have had on the company's profit figures in each year, beginning in the year ended 30 June 2019.

(b) Determine the effect of the inventory errors on the company's Financial Position over the total time period. Include in your answer the cumulative impact on the company's retained earnings.