Evergreen Supply, Co., shows the following financial statement data for 201 0, 2011, and 201 2. Prior to issuing the 2012 statements, auditors found that the ending inventory for 2010 was understated by $5,000 and that the ending inventory for 2012 was overstated by $8,000. The ending inventory at December 31, 201 1, was correct.

Requirements
1. State whether each year€™s net income before corrections is understated or over-stated 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 2012 income statement if the 2010 inventory error is leftuncorrected?

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2011 In thousands Sales Revenue Cost of Goods Sold: 2012 2010 5206 $193 $182 Beginning Inventory S 32 Net Purchases Cost of Goods Available157 Ending Inventory Cost of Goods Sold s 23 129 152 32 s 25 120 145 23 125 20 Gross Profit Operating Expenses Net Income 137 69 37 S 32 120 73 35 S 38 122 60 36 s 24