The income statements for Sherwood Company summarized for a four-year period shows the following:

An audit revealed that in determining these amounts, the ending inventory for 2010 was overstated by \(\$ 22,000\). The company uses a periodic inventory system.
Required:
1. Revise these income statements to reflect the correct amounts.
2. Did the error affect the cumulative profit for the four-year period? Explain.
3. What effect did the error have on the income tax expense for years 2010 and 2011 ?

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Sales revenue Cost of sales Gross profit 2012 $2,025,000 2011 2010 2009 $2,450,000 $2,700,000 $2,975,000 1,505,000 1,627,000 1,782,000 2,113,000 520,000 823,000 918,000 862,000 Operating expenses 490,000 513,000 538,000 542,000 Pretax profit 30,000 310,000 380,000. 320,000 Income tax expense (30%) 9,000 93,000 114,000 96,000 Profit $ 21,000 $ 217,000 $ 166,000 $ 224,000