The accounting records of Waterville Video Sales show these data (in millions). The shareholders are very happy with Waterville€™s steady increase in net income.

Auditors discovered that the ending inventory for 2008 was understated by $2 million and that the ending inventory for 2009 was also understated by $2 million. The ending inventory at December 31, 2010 was correct.

Requirements
1. Show corrected income statements for each of the three years.
2. How much did these assumed corrections add to or take away from Waterville€™s total net income over the three-year period? How did the corrections affect the trend of net income?
3. Will Waterville€™s shareholders still be happy with the company€™s trend of net income?
Give the reason for youranswer.

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2010 2008 $42 Net sales revenue. Cost of goods sold: $39 $36 $ 8 29 37 Beginning inventory $10 31 40 Cost of goods available...43 Less ending inventory. Cost of goods sold 32 10 30 28 Gross profit Operating expenses Net in $ 3