Notson Company reported these income statement data for a 2-year period.

Notson Company uses a periodic inventory system. The inventories at January 1, 2009, and December 31, 2010, are correct. However, the ending inventory at December 31, 2009, is overstated by $10,000.

Instructions
(a) Prepare correct income statement data for the 2 years.
(b) What is the cumulative effect of the inventory error on total gross profit for the 2 years?
(c) Explain in a letter to the president of Notson Company what has happened€”that is, the nature of the error and its effect on the financialstatements.

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2010 2009 Sales Beginning inventory Cost of goods purchased Cost of goods available for sale Ending inventory Cost of goods sold Gross profit $250000 $210,000 34,000 173,000 207,000 40,000 167,000 63,000 43,000 40,000 202,000 242,000 55,000 187,000