Presented below are the income statements for Saldron Manufacturing for the years ended December 31, 20X2, and 20X1.

Saldron Manufacturing

Comparative Income Statements

For years ending December 31

20X2 20X1

Sales $790 $620

Less: Cost of Goods Sold:

Beginning Inventory 70 60

Purchases 510 420

Cost of Goods Available for Sale 580 480

Less: Ending Inventory 90 70

Cost of Goods Sold 490 410

Gross Profit 300 210

Less: Operating Expenses 60 50

Income Before Taxes 240 160

Income Tax Expense (40%) 96 64

Net Income $144 $ 96

In 20X3 it was discovered that the 20X1 ending inventory was understated by $20, and the 20X2 ending inventory was overstated by $10. The 20X1 beginning inventory was correctly stated.

Identify the accounts which are incorrect on the 20X1, 20X2, income statements. State the dollar error (by how much they are incorrect) and whether the amounts overstate or understate balances.

Copy the question and write your answer next to the number. For example next to Ending inventory of 20X1 you need to write (20 under)