Savemore Supply, Co., shows the following financial statement data for 2014, 2015, and 2016. Prior to issuing
Question:
Savemore Supply, Co., shows the following financial statement data for 2014, 2015, and 2016.
Prior to issuing the 2016 statements, auditors found that the ending inventory for 2014 was overstated by $4,000 and that the ending inventory for 2016 was understated by $2,000. 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?
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