Build Right Supply, Co., shows the following financial statement data for 2014, 2015, and 2016. Prior to issuing the 2016 statements, auditors found the ending inventory for 2014 was understated by $1,000 and that the ending inventory for 2016 was overstated by $3,000. The ending inventory at December 31, 2015, was correct.

Requirements
1. State whether each year’s net income before corrections is understated or overstated and indicate the amount of the understatement or overstatement.
2. Prepare corrected income statements for the three years.
3. What is the impact on the 2016 income statement if the 2014 inventory error is left uncorrected?

Transcribed Image Text:

2015 2016 2014 Sales Revenue Cost of Goods Sold: Beginning Inventory Net Purchases Cost of Goods Available 252,000 Ending Inventory Cost of Goods Sold Gross Profit Operating Expenses Net Income |S 408,000 $388,000 $383,000 $ 17,000 232,000 234,000 247,000 20.000 254,000 17,000 14.000 227,000 161,000 237,000 146,000 238,000 170,000 34,000 $127.000 28,000 $118.000 S 132.000