The following highly condensed income statements and balance sheets are available for Budget Stores for a two-year period. (All amounts are stated in thousands of dollars.) Before releasing the 2014...

The following highly condensed income statements and balance sheets are available for Budget Stores for a two-year period. (All amounts are stated in thousands of dollars.)

Before releasing the 2014 annual report, Budget’s controller learns that the inventory of one of the stores (amounting to $600,000) was inadvertently omitted from the count on December 31, 2013. The inventory of the store was correctly included in the December 31, 2014, count.

Required

1. Prepare revised income statements and balance sheets for Budget Stores for each of the two years. Ignore the effect of income taxes.

2. If Budget did not prepare revised statements before releasing the 2014 annual report, what would be the amount of overstatement or understatement of net income for the two-year period? What would be the overstatement or understatement of retained earnings at December 31, 2014, if revised statements were not prepared?

3. Given your answers in part (2), does it matter if Budget bothers to restate the financial statements of the two years to rectify the error? Explain your answer.