Savemore Supply, Co., shows the following financial statement data for 2016, 2017, and 2018:

Before issuing the 2018 statements, auditors found that the ending inventory for 2016 was overstated by $4,000 and that the ending inventory for 2018 was understated by $2,000. The ending inventory at December 31, 2017, 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 would be the impact on the 2018 income statement if the 2016 inventory error is left uncorrected?

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2018 | $309,000 $ 16,000 2017 $270,000 2016 Net Sales Revenue Cost of Goods Sold: Beginning Inventory Net Purchases Cost of Goods Available Ending Inventory Cost of Goods Sold Gross Profit Operating Expenses Net Income $287,000 $ 21,000 $ 13,000 133,000 146,000 112,000 133,000 16,000 151,000 17,000 21,000 117,000 125,000 162,000 40,000 134,000 175,000 153,000 38,000 $115,000 $121,000 $122,000