Lally Industries shows the following financial statement data for 2012, 2013, and 2014.

Prior to issuing the 2014 statements, auditors found that the ending inventory for 2012 was understated by $5,000 and that the ending inventory for 2014 was over-stated by $12,000. The ending inventory at December 31, 2013, 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 2014 income statement if the 2012 inventory error is left uncorrected?

2014 (In thousands) Net Sales Revenue Cost of Goods Sold 2013 2012 $205 $170 $175 Beginning InventoryS 12 Net Purchases Cost of Goods Available 150 Ending Inventory Cost of Goods Sold S 27 103 130 12 24 126 150 27 138 21 Gross Profit Operating Expenses Net Income 129 76 47 $ 29 118 52 31 $ 21 123 52 36 16