Correct EI=40,000 El overstated by 10,000 El understated by 10,000 both El and purchases overstated by 10,000 both El and purchases understated by 10,000 Computation of CGs Beg. Inventory 50,000 50,000 50,000 50,000 50,000 Net purchases 90,000 90,000 90,000 90,000 90,000 Cost of goods available for sale 140,000 140,000 140,000 140,000 140,000 less Ending Inventory 40,000 50,000 30,000 50,000 30,000 Cost of goods sold (CGS) 100,000 90,000 110,000 90,000 110,000 Income Statement Sales 200,000 200,000 200,000 200,000 200,000 CGS 100,000 90,000 110,000 90,000 110,000 Gross Profit 100,000 110,000 90,000 110,000 90,000 Less expenses 40,000 40,000 40,000 40,000 40,000 Net Income 60,000 70,000 50,000 70,000 50,000 Retained Earnings Statement Beginning Retained Earnings 20,000 20,000 20,000 20,000 20,000 Net income 60,000 70,000 50,000 70,000 50,000 Dividends 10,000 10,000 10,000 10,000 10,000 Ending Retained Earnings 70,000 80,000 60,000 80,000 60,000