Analysis of inventory errors

Assume that Volleyball Pro Equipment had $900,000 of sales during each of three consecutive years, and it purchased merchandise costing $500,000 during each of the years. It also maintained a $200,000 inventory from the beginning to the end of the three-year period. However, it mad an error at the end of the first year, 2020, that caused its ending 2020 inventory to appear on its statement at $180,000 rether than the correct $200,000.

Required

1. Calculate the actual amount of the company's gross in each of the years.

2. Prepare a comparative income statement like Exhibit 6.12 to show the effects of this error on the company's cost of goods sold and gross profit in 2020, 2021, and 2022.