What is the cumulative effect of the inventory error

Question

Assignment:

Staley Watch Company reported the following income statement data for a 2-year period.

	2008	2009
Sales	$210,000	$250,000
Cost of goods sold
Beginning inventory	32,000	44,000
Cost of goods purchased	173,000	202,000
Cost of goods available for sale	205,000	246,000
Ending inventory	44,000	52,000
Cost of goods sold	161,000	194,000
Gross Profit	$49,000	$56,000

Staley uses a periodic inventory system. The inventories at January 1, 2008, and December 31, 2009, are correct. However, the ending inventory at December 31, 2008, was overstated $5,000.

Prepare correct income statement data for the 2 years.

	2008	2009
Sales	$	$
Cost of goods sold
Beginning inventory
Cost of goods purchased
Cost of goods available for sale
Ending inventory
Cost of goods sold
Gross Profit	$	$

What is the cumulative effect of the inventory error on total gross profit for the 2 years?

Explain in what has happened—i.e., the nature of the error and its effect on the financial statements.