Great Foods Grocery reported the following comparative income statements for the years ended June 30, 2016 and 2015:

During 2016, Great Foods discovered that ending 2015 merchandise 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 oroverstatement.

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GREAT FOODS GROCERY Income Statements Years Ended June 30, 2016 and 2015 2016 2015 5 139,000 $ 120,000 Sales Revenue Cost of Goods Scld: 13,000 Beginning Merchandise Inventory S Net Cost of Purchases Cost of Goods Available for Sale Less: Ending Merchandise Inventory Cost of Goods Scid 76,000 89,000 17,000 5 12,000 70,000 82,000 13,000 72,000 67,000 23,000 44,000 69,000 51,000 18,000 S 33,000 Gross Profit Operating Expenses Net Income