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Required information [The following information applies to the questions displayed below.) The income statement for Pruitt Company summarized for a four-year period shows the following: 2016 $ 2,027,000 1,492,000 535,000 473,000 62,000 21,700 2017 $ 2,451,000 1,616,000 835,000 505,000 330,000 115,500 2018 $ 2,704,000 000 ,0רר.1 934,000 519,000 415,000 145,250 269,750 2019 $ 2,979,000 2,101,000 878,000 537,000 341,000 119,350 Sales revenue Cost of goods sold Gross profit Expenses Pretax income Income tax expense (35%) Net income 2$ 40,300 214,500 221,650 An audit revealed that in determining these amounts, the ending inventory for 2017 was overstated by $27,000. The company uses a periodic inventory system. 3. What effect would the error have had on the income tax expense assuming a 35 percent average rate? Income Tax Expense 2017 2018 Overstatement Understatement

Required information [The following information applies to the questions displayed below.) The income statement for Pruitt Company summarized for a four-year period shows the following: 2016 $ 2,027,000 1,492,000 535,000 473,000 62,000 21,700 2017 $ 2,451,000 1,616,000 835,000 505,000 330,000 115,500 2018 $ 2,704,000 000 ,0רר.1 934,000 519,000 415,000 145,250 269,750 2019 $ 2,979,000 2,101,000 878,000 537,000 341,000 119,350 Sales revenue Cost of goods sold Gross profit Expenses Pretax income Income tax expense (35%) Net income 2$ 40,300 214,500 221,650 An audit revealed that in determining these amounts, the ending inventory for 2017 was overstated by $27,000. The company uses a periodic inventory system. 3. What effect would the error have had on the income tax expense assuming a 35 percent average rate? Income Tax Expense 2017 2018 Overstatement Understatement

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Required information [The following information applies to the questions displayed below.] The income statement for Pruitt Company summarized for a four-year period shows the following: 2018 $ 2,704,000 1,770,000 934,000 519,000 415,000 145,250 2016 $ 2,027,000 1,492,000 535,000 473,000 62,000 21,700 2017 $ 2,451,000 1,616,000 835,000 505,000 330,000 115,500 2019 $ 2,979,000 2,101,000 878,000 537,000 341,000 119,350 Sales revenue Cost of goods sold Gross profit Expenses Pretax income Income tax expense (35%) Net income 24 40,300 214,500 269,750 $ 221,650 An audit revealed that in determining these amounts, the ending inventory for 2017 was overstated by $27,000. The company uses a periodic inventory system. 3. What effect would the error have had on the income tax expense assuming a 35 percent average rate? Income Tax Expense 2017 2018 Overstatement Understatement
Transcribed Image Text:Required information [The following information applies to the questions displayed below.] The income statement for Pruitt Company summarized for a four-year period shows the following: 2018 $ 2,704,000 1,770,000 934,000 519,000 415,000 145,250 2016 $ 2,027,000 1,492,000 535,000 473,000 62,000 21,700 2017 $ 2,451,000 1,616,000 835,000 505,000 330,000 115,500 2019 $ 2,979,000 2,101,000 878,000 537,000 341,000 119,350 Sales revenue Cost of goods sold Gross profit Expenses Pretax income Income tax expense (35%) Net income 24 40,300 214,500 269,750 $ 221,650 An audit revealed that in determining these amounts, the ending inventory for 2017 was overstated by $27,000. The company uses a periodic inventory system. 3. What effect would the error have had on the income tax expense assuming a 35 percent average rate? Income Tax Expense 2017 2018 Overstatement Understatement
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