Insigne Co. uses a periodic inventory system. Beginning inventory on January 1 was overstated by $31,700, and its ending inventory on December 31 was overstated by $16,300. In addition, a purchase of merchandise costing $74,000 was incorrectly recorded as a $7,400 purchase. None of these errors were discovered until the next year. As a result, taxable income for this year was:

Multiple Choice

• Overstated by $18,600

• Understated by $82,000

• Understated by $114,600

• Overstated by $51,200