Michael Manufacturers fraudulently overstated its December 31, 2010 and December 31, 2011 inventory by $3,000 and $6,000, respectively. As a result of these overstatements,

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The overstatement of inventory in 2010 increases the income for that year by $3,000. In 2011, the beginning inventory is overstated by $3,000, which offsets the $6,000 overstatement at the end of 2011, resulting in a net overstatement of $3,000 for 2011.

Michael Manufacturers Fraudulently Overstated Its December 31, 2010 and December