1. Prepare corrected income statements for the three years.2. State, whether each year’s net income before your corrections is understated or overstated, and indicate the amount of the understatement or overstatement. 3. Compute the inventory, turnover and days sales in inventory using the correct income statement for the three years. round to two decimals. Harmony Carpets' books show the following data.(Click the icon to view the income statements.)In early 2026, auditors found that the ending merchandise inventory for 2023 was understated by $5,000 and that the ending merchandise inventory for 2025 was overstated by $6,000. The ending merchandiseinventory at December 31, 2024, was correct.Data tableNet Sales RevenueCost of Goods Sold:Beginning Merchandise InventoryPlus: Net Cost of Inventory PurchasedCost of Goods Available for SaleLess: Ending Merchandise InventoryCost of Goods SoldGross ProfitOperating ExpensesNet Income2025$ 20,000133.000153,00028,000$ 210,000125,00085,00055,00030,0002024$ 23,000101,000124,00020,000$ 167,000104,00063,00035,00028,000S202333,00093,000126,00023,000$ 181,000$103,00078,00046,00032,000X

Opening Inventory - Overstatement of opening inventory reduces the net income of the current year…

Answered: 1. Prepare corrected income statements…

College Accounting, Chapters 1-27

23rd Edition

ISBN:9781337794756

Author:HEINTZ, James A.

Publisher:HEINTZ, James A.

Chapter14: Adjustments For A Merchandising Business

Section: Chapter Questions

Problem 3MC: Under the periodic inventory system, what account is debited when an estimate is made for the cost...

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1. Prepare corrected income statements for the three years. 2. State, whether each year’s net income before your corrections is understated or overstated, and indicate the amount of the understatement or overstatement. 3. Compute the inventory, turnover and days sales in inventory using the correct income statement for the three years. round to two decimals.

Harmony Carpets' books show the following data.
(Click the icon to view the income statements.)
In early 2026, auditors found that the ending merchandise inventory for 2023 was understated by $5,000 and that the ending merchandise inventory for 2025 was overstated by $6,000. The ending merchandise
inventory at December 31, 2024, was correct.
Data table
Net Sales Revenue
Cost of Goods Sold:
Beginning Merchandise Inventory
Plus: Net Cost of Inventory Purchased
Cost of Goods Available for Sale
Less: Ending Merchandise Inventory
Cost of Goods Sold
Gross Profit
Operating Expenses
Net Income
2025
$ 20,000
133.000
153,000
28,000
$ 210,000
125,000
85,000
55,000
30,000
2024
$ 23,000
101,000
124,000
20,000
$ 167,000
104,000
63,000
35,000
28,000
S
2023
33,000
93,000
126,000
23,000
$ 181,000
$
103,000
78,000
46,000
32,000
X

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