A & R Industrial Supply shows the following financial statement data for 2008, 2009, and 2010. Prior to issuing the 2010 statements, auditors found that the ending inventory for 2008 was understated by \($8,000\) and that the ending inventory for 2010 was overstated by \($9,000.\) The ending inventory at December 31,2009, 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 2010 income statement if the 2008 inventory error is left uncorrected?

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(In thousands) Sales Revenue 2010 2009 2008 $210 $191 $186 Cost of Goods Sold: Beginning Inventory $ 12 $ 18 $ 15 Net Purchases 143 121 128 Cost of Goods Available 155 139 143 Ending Inventory 16 12 18 Cost of Goods Sold 139 127 125 Gross Profit 71 64 61 Operating Expenses 46 43 42 Net Income $ 25 $ 21 $ 19