P6-35A Correcting inventory errors over a three-year period and computing inventory turnover and days’ sales in inventory Evergreen Carpets’ books show the following data. In early 2016, auditors found that the ending merchandise inventory for 2013 was understated by $6,000 and that the ending merchandise inventory for 2015 was overstated by $7,000.

The ending merchandise inventory at December 31, 2014, 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 or overstatement.
3. Compute the inventory turnover and days’ sales in inventory using the corrected income statements for the three years. (Round all numbers to two decimals.)

Net Sales Revenue Cost of Goods Sold: Beginning Merchandise Inventory Net Cost of Purchases Cost of Goods Available for Sale Less: Ending Merchandise Inventory Cost of Goods Sold Gross Profit Operating Expenses Net Income $ 20,000 140,000 160,000 29,000 2015 $210,000 131,000 $ 27,000 108,000 135,000 20,000 2014 $ 162,000 $ 41,000 98,000 139,000 2013 $ 169,000 27,000 115,000 112,000 57,000 53,000 $ 26,000 24,000 $ 29,000 $ 33,000 79,000 47,000 18,000