Financial & Managerial Accounting 3rd Edition by Charles Horngren,Harrison, Walter,Suzanne Oliver

Exercise 22

Correcting an inventory error-two years
Great Foods Grocery reported the following comparative income statement for the years ended June 30, 2012 and 2011:

During 2012, Great Foods discovered that ending 2011 inventory was overstated by $4,500.
Requirements
1. Prepare corrected income statements for the two 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.