Tonale Company began operations in 2014.During the first two years of operations,Tonale made undiscovered errors in taking its year-end inventories that overstated 2014 ending inventory by $50,000 and overstated 2015 ending inventory by $40,000.The combined effect of these errors on reported income is 2014 2015 2016

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Overstating ending inventory in one year results in overstated profits for that year because the cost of goods sold is understated (expenses are lower, so profits appear higher). In 2014, the $50,000 overstatement directly leads to profits being overstated by $50,000. In 2015, the additional $40,000 overstatement compounds the error, but it's important to note that the effect of the previous year's overstatement carries over. The 2015 error effectively corrects $50,000 of the previous year's overstatement but then adds a new $40,000 overstatement, resulting in a net understatement of $10,000 for 2015. The 2016 financials are not directly affected by the inventory errors of 2014 and 2015, but the cumulative effect of the errors is corrected once the inventories are correctly stated, leading to an understatement of $40,000 when the errors from the previous years are corrected.

Tonale Company Began Operations in 2014