Textbook Problem

Effects of an Error in Ending Inventory

Waymire Company prepared the partial income statements presented below for 2019 and 2018.

During 2020, Waymire’s accountant discovered that ending inventory for 2018 had been understated by $6,500.

Required:

1. Prepare corrected income statements for 2019 and 2018.

2. Prepare a schedule showing each financial statement item affected by the error and the amount of the error for that item (ignore the effect of income taxes). Indicate whether each error is an overstatement (+) or an understatement (-).