QUESTION
1. Prepare the income statements to reflect the correct amounts, taking into consideration the inventory error.
2. Compute the gross profit percentage for each year before the correction and after the correction. (Round your answers to the nearest whole percent.)
3. What effect would the error have had on the income tax expense assuming a 30 percent average rate?
In case of any doubts or issues, please do comment below
QUESTION 1. Prepare the income statements to reflect the correct amounts, taking into consideration the inventory...
The income statement for Pruitt Company summarized for a four-year period shows the following: 2016 2017 2018 2019 Sales revenue $ 2,026,000 $ 2,452,000 $ 2,707,000 $ 2,994,000 Cost of goods sold 1,489,000 1,609,000 1,779,000 2,097,000 Gross profit 537,000 843,000 928,000 897,000 Expenses 472,000 495,000 527,000 526,000 Pretax income 65,000 348,000 401,000 371,000 Income tax expense (40%) 26,000 139,200 160,400 148,400 Net income $ 39,000 $ 208,800 $ 240,600 $ 222,600 An audit revealed that in determining these amounts, the...
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 2018 2017 2016 2015 $3,625 $4,050 $4,300 $4,575 2,305 2,427 2,582 2,913 Gross profit Operating expenses 1,320 650 1,623 673 1,718 698 1,662 702 Pretax earnings Income tax expense (30%) 670 201 950 285 1,020 306 960 288 Net earnings $ 469 $ 665 $ 714 $ 672 An audit revealed that in determining these...
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 2018 2017 2016 2015 $2,325 $2,750 $3,000 $3,275 1,655 1,777 1,932 2,263 Gross profit Operating expenses 670 520 973 543 1,068 568 1,012 572 Pretax earnings Income tax expense (40%) 150 60 430 172 500 200 440 176 Net earnings $ 90 $ 258 $ 300 $ 264 An audit revealed that in determining these...
An audit revealed that in determining these amounts, the ending
inventory for 2016 was overstated by $22,000. The inventory balance
on December 31, 2017, was accurately stated. The company uses a
periodic inventory system.
Required:
1. Restate the partial income statements to
reflect the correct amounts, after fixing the inventory error.
2-a. Compute the gross profit percentage for
each year (a) before the correction and (b) after
the correction.
2-b. Does the pattern of gross profit
percentages lend confidence to...
The income statement for Pruitt Company summarized for a
four-year period shows the following:
[The following information applies to the questions displayed below) The income statement for Pruitt Company summarized for a four-year period shows the following: 2017 2016 2018 2019 2,028,000 2,460.000 2,712,000 2,983,000 Sales revenue Cost of goods sold 1,486,000 1,616,000 1,766,000 2,094,000 542,000 889,000 Gross profit 844,000 946,000 532,000 Expenses 470,000 495,000 525,000 414,000 364,000 Pretax income 72,000 349.000 127,400 25,200 122150 144,900 46,800 226,850 226,850 236.600...
Partial income statements for Sherwood Company summarized for a four-year period show the following: Net Sales Cost of Goods Sold Gross Profit 2015 $2,200,000 1,496,000 $ 704,000 2016 $2,600,000 1,742,00 $ 858,000 1 2017 $2,700,000 ,863,eee $837,000 2018 $3,200,000 2,176,000 $1,024,000 An audit revealed that in determining these amounts, the ending inventory for 2016 was overstated by $22.000. The inventory balance on December 31, 2017, was accurately stated. The company uses a periodic inventory system. Required: 1. Restate the partial...
Partial income statements for Sherwood Company summarized for a four-year period show the following: 2015 2016 2017 2018 Net Sales $ 2,500,000 $ 2,900,000 $ 3,000,000 $ 3,500,000 Cost of Goods Sold 1,625,000 1,856,000 1,980,000 2,275,000 Gross Profit $ 875,000 $ 1,044,000 $ 1,020,000 $ 1,225,000 An audit revealed that in determining these amounts, the ending inventory for 2016 was overstated by $25,000. The inventory balance on December 31, 2017, was accurately stated. The company uses a periodic inventory system....
Partial income statements for Sherwood Company summarized for a four-year period show the following: Net Sales Cost of Goods Sold Gross Profit 2015 $1,500,000 1,125,000 $ 375,000 2016 $1,900,000 1,406,000 $ 494,000 2017 $2,000,000 1,520,000 $ 480,000 2018 $2,500,000 1,875,000 $ 625,000 An audit revealed that in determining these amounts, the ending inventory for 2016 was overstated by $15,000 on December 31, 2017, was accurately stated. The company uses a periodic inventory system. Required: 1. Restate the partial income statements...
Need help with income statement (corrected) and compute the gross
profit percentage for each year before and after the correcrion.
Partial income statements for Sherwood Company summarized for a four-year period show the following: Net Sales Cost of Goods Sold Gross Profit 2015 $1,700,000 1,241,000 $ 459,000 2016 $2,100,000 1,512,000 $588,000 2017 $2,200,000 1,628,000 $ 572,000 2018 $2,700,000 1,971,000 $ 729,000 An audit revealed that in determining these amounts, the ending inventory for 2016 was overstated by $17,000. The Inventory...
Taxable income and pretax financial income would be identical
for Crane Co. except for its treatments of gross profit on
installment sales and estimated costs of warranties. The following
income computations have been prepared.
Taxable income
2016
2017
2018
Excess of revenues over
expenses (excluding two temporary differences)
$154,000
$215,000
$93,500
Installment gross profit
collected
8,500
8,500
8,500
Expenditures for
warranties
(5,500
)
(5,500
)
(5,500
)
Taxable
income
$157,000
$218,000
$96,500
Pretax financial income
2016
2017
2018
Excess of...