The following highly condensed income statements and balance sheets are available for Budget Stores for a two-year period. (All amounts are stated in thousands of dollars.)

Before releasing the 2010 annual report, Budget€™s controller learns that the inventory of one of the stores (amounting to $600,000) was inadvertently omitted from the count on December 31, 2009. The inventory of the store was correctly included in the December 31, 2010, count.
Required
1. Prepare revised income statements and balance sheets for Budget Stores for each of the two years. Ignore the effect of income taxes.
2. If Budget did not prepare revised statements before releasing the 2010 annual report, what would be the amount of overstatement or understatement of net income for the two-year period? What would be the overstatement or understatement of retained earnings at December 31, 2010, if revised statements were not prepared?
3. Given your answers in part (2), does it matter if Budget bothers to restate the financial statements of the two years to rectify the error? Explain youranswer.

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Income Statements 2010 2009 Hevenues Cost of goods sold Gross proft Operating expenses $20,000 13,000 7000 3,000 $15,000 10,000 5,000 Net income 3,000 Balance Sheets December 31, 2010 December 31, 2009 $ 1,700 4,200 2,500 15,000 $23.400 8,500 5,000 9,900 Cash nventory Other current assets Long-term assets $1.500 3,500 2,000 14,000 Total assets Liabilities Capital stock Retained earnings S 7000 5,000 Total liabilities and stockholders' equity$23,400 $21.000