Condensed income statements for Kan-Du Company for two years are shown below.

After the end of 2011, the company discovered that an error had resulted in a $36,000 understatement of the 2010 ending inventory. Compute the corrected operating income for 2010 and 2011. What effect will the error have on operating income and owner€™s equity for2012?

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2011 2010 Sales Cost of goods sold Gross margin Operating expenses Income before income taxes S504,000 300,000 S204,000 120,000 S 84.000 S420,000 216,000 $204,000 120,000 S 84,000