Peaceful Carpets’ books show the following data

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P6-42B Correcting inventory errors over a three-year period [15–20 min]

Peaceful Carpets’ books show the following data. In early 2013, auditors found that
the ending inventory for 2010 was understated by $4,000 and that the ending inventory
for 2012 was overstated by $5,000. The ending inventory at December 31,
2011, was correct.

Net sales revenue . . . . . . . . . 201,000 161,000 176,000
Cost of goods sold:
Beginning inventory . . . . . . . . . .22,000 25,000 38,000
Net purchases . . . . . . . . . . 130,000 104,000 92,000

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.