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 (40%) Net earnings An audit revealed that in determining these amounts, the ending inventory for 2022 was understated by $56. 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.) Sales revenue Cost of sales Gross profit Operating expenses Pretax earnings Income tax expense Net earnings 2021 2024 2023 2022 $3,725 $4,150 $4,400 $4,675 2,355 2,477 2,632 2,963 1,370 1,673 1,768 1,712 660 683 708 712 710 990 1,060 1,000 284 396 424 400 $ 426 $ 594 $ 636 $ 600 O Not affected O Affected 2023 2022 PRUITT COMPANY Corrected Statement of Earnings 2024 2023 2. Did the error affect the cumulative net earnings for the four-year period? 2022 Income tax expense 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 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 (40%) Net earnings An audit revealed that in determining these amounts, the ending inventory for 2022 was understated by $56. 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.) Sales revenue Cost of sales Gross profit Operating expenses Pretax earnings Income tax expense Net earnings 2021 2024 2023 2022 $3,725 $4,150 $4,400 $4,675 2,355 2,477 2,632 2,963 1,370 1,673 1,768 1,712 660 683 708 712 710 990 1,060 1,000 284 396 424 400 $ 426 $ 594 $ 636 $ 600 O Not affected O Affected 2023 2022 PRUITT COMPANY Corrected Statement of Earnings 2024 2023 2. Did the error affect the cumulative net earnings for the four-year period? 2022 Income tax expense 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
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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 (40%)
Net earnings
Sales revenue
Cost of sales
Gross profit
Operating expenses
Pretax earnings
Income tax expense
Net earnings
2024
$3,725
2,355
1,370
660
710
990
1,060
424
284
396
426 $ 594 $ 636
An audit revealed that in determining these amounts, the ending inventory for 2022 was understated by $56.
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.)
O Not affected
O Affected
2023
2022
2023 2022
$4,150 $4,400
2,477 2,632
1,673 1,768
683
708
$
PRUITT COMPANY
Corrected Statement of Earnings
2024
2023
Income tax expense
2021
$4,675
2,963
1,712
712
2. Did the error affect the cumulative net earnings for the four-year period?
1,000
400
$ 600
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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