P6-5 (Algo) Analyzing and interpreting the Effects of Inventory Errors L06-5 The statements of earnings for Pruitt Company summarized for a four-year period show the following (amounts in thousands of dollars): Sales revenue Cost of sales Gross profit Operating expenses Pretax earnings Income tax expense (30%) Net earnings Sales revenue Cost of sales Gross profit Operating expenses Pretax earnings Income tax expense Net earings 2023 2024 $3,425 $3,850 2,205 2,327 1,523 653 2023 2022 1,220 630 O Not affected O Affected 590 177 413 $ 870 261 609 income tax expense An audit revealed that in determining these amounts, the ending inventory for 2022 was understated by $50. 2022 $4,100 2,482 Required: 1. Revise these statements of earnings to reflect the correct amounts. (Do not round intermediate calculations. Round the final answers to the nearest dollar amount.) PRUITT COMPANY Corrected Statement of Earnings 2023 2024 1,618 678 940 282 $ 658 2921 $4,375 2,813 1,562 682 880 $ 616 2022 2. Did the error affect the cumulative net earnings for the four-year period? 3. What effect did the error have on the income tax expense for 2022 and 2023? (Do not round intermediate calculations. Round the final answers to the nearest dollar amount.) 2021
P6-5 (Algo) Analyzing and interpreting the Effects of Inventory Errors L06-5 The statements of earnings for Pruitt Company summarized for a four-year period show the following (amounts in thousands of dollars): Sales revenue Cost of sales Gross profit Operating expenses Pretax earnings Income tax expense (30%) Net earnings Sales revenue Cost of sales Gross profit Operating expenses Pretax earnings Income tax expense Net earings 2023 2024 $3,425 $3,850 2,205 2,327 1,523 653 2023 2022 1,220 630 O Not affected O Affected 590 177 413 $ 870 261 609 income tax expense An audit revealed that in determining these amounts, the ending inventory for 2022 was understated by $50. 2022 $4,100 2,482 Required: 1. Revise these statements of earnings to reflect the correct amounts. (Do not round intermediate calculations. Round the final answers to the nearest dollar amount.) PRUITT COMPANY Corrected Statement of Earnings 2023 2024 1,618 678 940 282 $ 658 2921 $4,375 2,813 1,562 682 880 $ 616 2022 2. Did the error affect the cumulative net earnings for the four-year period? 3. What effect did the error have on the income tax expense for 2022 and 2023? (Do not round intermediate calculations. Round the final answers to the nearest dollar amount.) 2021
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:P6-5 (Algo) Analyzing and Interpreting the Effects of Inventory Errors LO6-5
The statements of earnings for Pruitt Company summarized for a four-year period show the following (amounts in thousands of
dollars):
Sales revenue
Cost of sales
Gross profit
Operating expenses
Pretax earnings
Income tax expense (30%)
Net earnings
An audit revealed that in determining these amounts, the ending inventory for 2022 was understated by $50.
Sales revenue
Cost of sales
Gross profit
Required:
1. Revise these statements of earnings to reflect the correct amounts. (Do not round intermediate calculations, Round the final
answers to the nearest dollar amount.)
Operating expenses
Pretax earnings
Income tax expense
Net earnings
2023
2022
2022
2021
2024 2023
$3,425 $3,850 $4,100 $4,375
2,205
2,327
2,482
2,813
1,220
1,523
1,618
1,562
630
678
682
590
940
880
177
282
264
$ 413 $
609 $ 658 $ 616
O Not affected
O Affected
653
870
261
PRUITT COMPANY
Corrected Statement of Earnings
2023
2024
2. Did the error affect the cumulative net earnings for the four-year period?
Income tax expense
2022
3. What effect did the error have on the income tax expense for 2022 and 2023? (Do not round intermediate calculations. Round the
final answers to the nearest dollar amount.)
2021
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