Jacob?s Upholstery, Inc., reported the following comparative income statements for the years ended September 30, 2018, and September 30, 2017.

During 2018, Jacob?s Upholstery, Inc., discovered that the 2017 ending inventory, as previously reported, was understated by $1,500.

Requirements

1. Prepare the corrected comparative income statements for the two-year period, complete with a heading for the statements.

2. What was the effect of the error on net income for the two years combined? Explain your answer.

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Jacob's Upholstery, Inc. Comparative Income Statements For the Years Ended September 30, 2018 and 2017 2018 2017 $294,000 Sales Revenue $286,000 Cost of Goods Sold: Beginning Inventory Net Purchases $14,500 162,000 176,500 $14,000 157,000 171,000 Cost of Goods Available for Sale Ending Inventory Cost of Goods Sold 19,000 14,500 157,500 136,500 34,000 $102,500 156,500 129,500 33,000 $ 96,500 Gross Profit Operating Expenses Net Income