Ringo Company had $980,000 of sales in each of three consecutive years 2010–2012, and it purchased merchandise costing $540,000 in each of those years. It also maintained a $280,000 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 2010 that caused its year-end 2010 inventory to appear on its statements as $260,000 rather than the correct $280,000.

Ringo Company had $980,000 of sales in each of three consecutive years 2010–2012, and it purchased merchandise costing $540,000 in each of those years. It also maintained a $280,000 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 2010 that caused its year-end 2010 inventory to appear on its statements as $260,000 rather than the correct $280,000.

1.

Determine the correct amount of the company's gross profit in each of the years 2010 – 2012.

 

2.

Prepare comparative income statements to show the effect of this error on the company's cost of goods sold and gross profit for each of the years 2010−2012.