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Montpellier Company discovered that in its 2019 financial statements, the 2019 ending inventory was overstated by...

Montpellier Company discovered that in its 2019 financial statements, the 2019 ending inventory was overstated by $12,000 and that the 2019 beginning inventory was overstated by $7,000. Before correcting these errors, Montpellier had reported $110,000 of pre-tax income.

What should Montpellier report as the correct 2019 pre-tax income? (Hint: Determine separately the effect of each of the two errors on pre-tax income, and then determine the net effect of the two.)

  • $91,000.
  • $105,000.
  • $117,000.
  • $129,000.
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