E6-40B. (Learning Objective 5: Correcting an inventory error) Friendly Harbor Marine Supply reported the following comparative Income Statement for the years ended September 30, 20X6 and 20X5:

Friendly Harbor’s president and shareholders are thrilled by the company’s boost in sales and net income during 20X6. Then the accountants for the company discover that ending 20X5 inventory was understated by €6,800. Prepare the corrected comparative Income Statement for the two-year period, complete with a heading for the statement. How well did Friendly Harbor really perform in 20X6, as compared with 20X5?

A1 2 N Friendly Harbor Marine Supply Income Statements 3 Sales revenue 4 Cost of goods sold: 5 19 Beginning inventory Net purchases 7 Cost of goods available 8 9 Ending inventory Cost of goods sold 10 Gross profit 11 Operating expenses 12 13 Net income 12 Months Ended September 30 20X6 139,000 20X5 121,000 13,000 12,000 74,000 69,000 87,000 81,000 (18,500) (13,000) 68,500 68,000 70,500 53,000 26,000 19,000 44,500 34,000