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Assume that net purchases were overstated $22,000 in 2014, the beginning merchandise inventory was understated $12,000 in 2014, operating expenses for 2015 were understated $2,500 and the ending merchandise inventory was overstated $7,000 in 2015. Assume that no corrections were made during 2014 or 2015. All other items in the income statement were correct.
What affect does this have on the gross profit and goods available for sale in the 2014 income statement; in dollars understated or overstated?
What affect does this have on net income and retained earnings in dollars understated or overstated for 2015?
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