Vibrant Company had $850,000 of sales in each of three consecutive years 2016-2018, and it purchased merchandise costing $500,000 in each of those years. It also maintained a $250,000 physical inventory from the beginning to the end of that three-year period. In accounting for inventory, it made an error at the end of year 2016 that caused its year-end 2016 inventory to appear on its statements as $230,000 rather than the correct $250,000.

1. Determine the correct amount of the company's gross profit in each of the years 2016-2018.

2. Prepare comparative income statements as in Exhibit 6.11 to show the effect of this error on the company's cost of goods sold and gross profit for each of the years 2016-2018.

Exhibit 6.11

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Income Statements 2015 2016 2017 $100,000 $100,000 $100,000 Sales.. Cost of goods sold Beginning inventory... Cost of goods purchased. $20,000 $16,000* $20,000 60,000 60,000 60,000 80,000 Goods available for sale 76,000 80,000 16,000* Ending inventory . 20,000 20,000 Cost of goods sold. 64,000' 36,000 56,000' 60,000 Gross profit.. 40,000 44,000 10,000 Expenses.. 10,000 10,000 $ 26,000 $ 34,000 $ 30,000 Net income