Peaceful Carpets€™ books show the following data. In early 2013, auditors found that the ending inventory for 2010 was understated by $4,000 and that the ending inventory for 2012 was overstated by $5,000. The ending inventory at December 31, 2011, was correct.

Requirements
1. Prepare corrected income statements for the three years.
2. State whether each year€™s net income€”before your corrections€”is understated or overstated and indicate the amount of the understatement oroverstatement.

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2012 2011 2010 Net sales revenue $201,000 $176,000 $161,000 Cost of goods sold: . Beginning inventory Net purchases . Cost of goods available Ending inventory Cost of goods sold Gross profit Operating expenses Net income. $ 22,000 130,000 $ 25,000 104,000 $129,000 $ 38,000 92,000 $130,000 (25,000) (31,000) (22,000) 121,000 105,000 $ 71,000 35,000 $ 36,000 107,000 $ 54,000 26,000 S 80,000 56,000 $ 24,000 $ 28,000