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 earnings Not affected Affected 2021 $2,125 1,555 S 570 500 70 21 S An audit revealed that in determining these amounts, the ending Inventory for 2019 was understated by $24. 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.) 2019 2020 $2,550 $2,800 1,677 1,832 968 548 PRUITT COMPANY Corrected Statement of Earnings 2021 2020 2,125 $ 1,555 873 523 570->> 500 350 105 $ 245 $ 294 70- 21 49 $ Answer is not complete. 420 126 2,550 1,701 873 523 350 € 105 € 245 $ $ 2018 $3,075 2,163 2019 912 552 360 108 252 2,800 $ 1,808 958 X 548 420 294 S 2018 2. Did the error affect the cumulative net earnings for the four-year period? 3,075 2,163 912 552 300 108 252 3. What effect did the error have on the Income tax expense for 2019 and 2020? (Do not round Intermediate calculations. Round the final answers to the nearest dollar amount.)
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 earnings Not affected Affected 2021 $2,125 1,555 S 570 500 70 21 S An audit revealed that in determining these amounts, the ending Inventory for 2019 was understated by $24. 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.) 2019 2020 $2,550 $2,800 1,677 1,832 968 548 PRUITT COMPANY Corrected Statement of Earnings 2021 2020 2,125 $ 1,555 873 523 570->> 500 350 105 $ 245 $ 294 70- 21 49 $ Answer is not complete. 420 126 2,550 1,701 873 523 350 € 105 € 245 $ $ 2018 $3,075 2,163 2019 912 552 360 108 252 2,800 $ 1,808 958 X 548 420 294 S 2018 2. Did the error affect the cumulative net earnings for the four-year period? 3,075 2,163 912 552 300 108 252 3. What effect did the error have on the Income tax expense for 2019 and 2020? (Do not round Intermediate calculations. Round the final answers to the nearest dollar amount.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Transcribed Image Text:The statements of earnings for Pruitt Company summarized for a four-year perlod show the following (amounts in thousands of
dollars):
Sales revenue
Cost of sales
Gross profit
Operating expenses
Pretax earnings
Income tax expense (38%)
Net earnings
Sales revenue
Cost of sales
Gross profit
Operating expenses
Pretax earnings
Income tax expense
Net earnings
Not affected
O Affected
2020
2019
2821
$ 2,125
1,555
$
S
570
500
2020
$ 2,550
1,677
An audit revealed that in determining these amounts, the ending Inventory for 2019 was understated by $24.
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.)
Income tax expense
873
523
S 2,125 $
1,555
570
500✔
70-
21✔
49 $
912
552
70
350
420
360
21
105
126
108
49 $ 245 $ 294 $ 252
PRUITT COMPANY
Corrected Statement of Earnings
2021
2020
2019
$ 2,800
1,832
968
548
Answer is not complete.
2018
$ 3,075
2,163
2,550
1,701✔
873 x
523✔
350 X
105 x
245 X $
2019
$ 2,800✔✔ S
1,808
968 X
548 ✔
2. Did the error affect the cumulative net earnings for the four-year period?
420 X
294 X S
2018
3,075
2,163✔
912✔✔
552✔
380✔✔
3. What effect did the error have on the income tax expense for 2019 and 2020? (Do not round Intermediate calculations. Round the
final answers to the nearest dollar amount.)
108 ✔
252✔
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