**Analyzing and Interpreting the Effects of Inventory Errors****P7-6 (Algo) Effects of Inventory Errors LO7-5**The income statement for Pruitt Company over a four-year period is displayed below:| Item | 2016 | 2017 | 2018 | 2019 ||----------------------------|----------|----------|----------|----------|| Sales Revenue | $2,041,000 | $2,469,000 | $2,712,000 | $2,977,000 || Cost of Goods Sold | $1,492,000 | $1,618,000 | $1,781,000 | $2,102,000 || Gross Profit | $549,000 | $851,000 | $931,000 | $875,000 || Expenses | $484,000 | $496,000 | $522,000 | $535,000 || Pretax Income | $65,000 | $355,000 | $409,000 | $340,000 || Income Tax Expense (30%) | $19,500 | $106,500 | $122,700 | $102,000 || Net Income | $45,500 | $248,500 | $286,300 | $238,000 |An audit revealed that the ending inventory for 2017 was overstated by $21,000. The company uses a periodic inventory system.**P7-6 Part 1****Requirement:**1. Prepare the income statements to reflect the correct amounts, considering the inventory error.**Corrected Income Statement for Pruitt Company (Four-Year Period):**| Item | 2016 | 2017 | 2018 | 2019 ||----------------------------|----------|----------|----------|----------|| Sales Revenue | $2,041,000 | $2,469,000 | $2,712,000 | $2,977,000 || Cost of Goods Sold | $1,492,000 | $1,639,000 | $1,760,000 | $2,102,000 || Gross Profit | $549,000 | $830,000 | $952,000 | $875,000 |

Income statement is the part of financial statements which are prepared at the end of the accounting…

[The following information applies to the questions displayed below.] The income statement for Pruitt Company summarized for a four-year period shows the following: Sales revenue Cost of goods sold Gross profit Expenses Pretax income Income tax expense (30%) Net income 2016 2017 $2,041,000 $2,469,000 1,492,000 549,000 1,618,000 484,000 65,000 19,500 $45,500 851,000 496,000 355,000 106,500 $248,500 2018 $2,712,000 1,781,000 931,000 522,000 409,000 122,700 $286,300 2019 $2,977,000 2,102,000 875,000 535,000 340,000 102,000 $238,000 An audit revealed that in determining these amounts, the ending inventory for 2017 was overstated by $21,000. The company uses a periodic inventory system.

[The following information applies to the questions displayed below.] The income statement for Pruitt Company summarized for a four-year period shows the following: Sales revenue Cost of goods sold Gross profit Expenses Pretax income Income tax expense (30%) Net income 2016 2017 $2,041,000 $2,469,000 1,492,000 549,000 1,618,000 484,000 65,000 19,500 $45,500 851,000 496,000 355,000 106,500 $248,500 2018 $2,712,000 1,781,000 931,000 522,000 409,000 122,700 $286,300 2019 $2,977,000 2,102,000 875,000 535,000 340,000 102,000 $238,000 An audit revealed that in determining these amounts, the ending inventory for 2017 was overstated by $21,000. The company uses a periodic inventory system.

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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