The income statements for Picard Company for the 3 years ending in 2019 appear below.

During 2019, Picard discovered that the 2017 ending inventory had been misstated due to the following two transactions being recorded incorrectly:
a. Inventory costing $37,000 that was returned to the manufacturer (a purchase return) was not recorded. The items were included in ending inventory.
b. A credit purchase of inventory made on August 30, 2017, for $12,800 was recorded twice. The goods were shipped F.O.B. shipping point and were shipped on September 5, 2017.
Required:
1. Was ending inventory for 2017 overstated or understated? By how much?
2. Prepare correct income statements for all 3 years.
3. Did the error in 2017 affect cumulative net income for the 3-year period? Explain your response.
4. Why was the 2019 net income unaffected?

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2019 2018 2017 Sales revenue Cost of goods sold Gross margin Operating expense Income from operations Other expenses Income before taxes Income tax expense (34%) Net income $ 998,400 (675,450) $ 975,300 (659,800) $ 315,500 $1,168,500 (785,800) $ 322,950 (155,300) $ 160,200 (54,500) (162,500) $ 220,200 (142,800) (73,500) $ 146,700 (49,878) 96,822 (58,150) $ 122,000 $ 105,700 (35,938) (41,480) $ 80,520 $ 69,762