Condensed income statements for Kozumel Company for two years are shown below.

After the end of 2011, the company discovered that an error had resulted in an $18,000 understatement of the 2010 ending inventory.

Compute the corrected income before income taxes for 2010 and 2011. What effect will the error have on income before income taxes and stockholders’ equity for 2012?

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2011 $252,000 ales Cost of goods sold Gross margin Operating expenses Income before inco 150,000 60,000 me takcs 42,000 42,000 2010 $210,000 108,000 $102,000 60,000 S102,000