Evergreen Carpets’ books show the following data

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P6-35A Correcting inventory errors over a three-year period [15–20 min]

Evergreen Carpets’ books show the following data. In early 2013, auditors found
that the ending inventory for 2010 was understated by $6,000 and that the ending
inventory for 2012 was overstated by $7,000. The ending inventory at December 31,
2011, was correct.

Net sales revenue . . . . . . . . . .210,000 162,000 169,000
Cost of goods sold:
Beginning inventory . . . . .20,000 27,000 41,000

and so on ....

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.