INVENTORY ERRORS McLelland Inc. reported net income of $150,000 for 2009 and $165,000 for 2010.

Early in 2010, McLelland discovers that the December 31, 2009 ending inventory was overstated by $8,000. For simplicity, ignore taxes.

Required:

. What is the correct net income for 2009? For 2010?

. Assuming the error was not corrected, what is the effect on the balance sheet at December 31, 2009? At December 31, 2010?

Cornerstone Exercise