Lozano Co. uses a periodic inventory system. Beginning inventory on January 1 was overstated by $31,700, and its ending inventory on December 31 was understated by $16,300. In addition, a purchase of merchandise costing $1,830 was incorrectly recorded as a $18,300 purchase. None of these errors were discovered until the next year. As a result, taxable income for this year was:

Multiple Choice

• Understated by $80,940

• Overstated by $94,630

• Overstated by $48,000

• Understated by $64,470