Required informationP7-6 (Algo) Analyzing and Interpreting the Effects of Inventory Errors LO7-5[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 revenueCost of goods soldGross profitExpensesPretax incomeIncome tax expense (30%)Net incomeP7-6 Part 120162017$2,041,000 $2,469,0001,618,0001,492,000549,000484,00065,00019,500$45,500Sales revenueCost of goods soldGross profitExpensesPretax incomeIncome tax expense (30%)Net income851,000496,000355,000106,500$248,500496,000334,0002018$2,712,0001,781,000100,200233,800931,000522,000409,000122,700$286,300An audit revealed that in determining these amounts, the ending inventory for 2017 was overstated by $21,000. Thecompany uses a periodic inventory system.Answer is complete but not entirely correct.PRUITT COMPANYIncome StatementFor the Four-Year Period20162017$ 2,041,000 $2,469,0001,492,000✔ 1,639,000549,000830,000484.00065,00019,50045,500Required:1. Prepare the income statements to reflect the correct amounts, taking into consideration the inventory error.2019$2,977,0002,102,000875,000535,00020182019$ 2,712,000 $ 2,977,0001,760,0002,102,000952,000875,000522,000535,000430,000✔340,000122,700102,000$ 307,300 $ 238,000340,000102,000$238,000

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.

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter10: Inventory

Section: Chapter Questions

Problem 14PB: Assuming a companys year-end inventory were understated by $16,000, indicate the effect...

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Assuming a companys year-end inventory were understated by $16,000, indicate the effect (overstated/understated/no effect) of the error on the following balance sheet and income statement accounts. A. Income Statement: Cost of Goods Sold B. Income Statement: Net Income C. Balance Sheet: Assets D. Balance Sheet: Liabilities E. Balance Sheet: Equity
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