EFFECTS OF AN ERROR IN ENDING INVENTORY. Waymire Company prepared the partial income statements presented below for 19x8 and 19x’:

REQUIRED:
1. Prepare corrected income statements for 19x8 and 19x7.
2. Prepare a schedule showing each financial statement item affected by the error and the amount of the error for that item. Indicate whether each error is an overstatement (+) or an understatement (—).

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Sales revenue Cost of goods sold Beginning inventory Purchases Cost of goods available for sale Ending inventory Gross margin Operating expenses Income before taxes 19x8 19x7 $ 39,300 $538,200 $ 32,100 $483,700 343,200 292,700 382,500 324,800 46,800 335,700 39,300 285,500 198,200 202,500 167,200 $ 35,300 151,600 $ 46,600