(L.OBJ. 6) Correcting inventory errors over a three-year period [15—20 min]
Harmony Carpets’ books show the following data (in thousands). In early 2013, auditors found that the ending Inventory for 2010 was understated by $9 thousand and that the ending inventory for 2012 was overstated by $9 thousand. The ending Inventory at December 31, 2011, 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.
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