Reference no: EM132428884

Question - The statements of earnings for Pruitt Company summarized for a four-year period show the following (amounts in thousands of dollars):

	2018	2017	2016	2015
Sales revenue	$2,025	$3,350	$3,600	$3,835
Cost of sales	1,955	2,077	2,232	2,563
Gross profit	970	1,273	1,368	1,312
Operating expenses	580	603	628	632
Pretax earnings	390	670	740	680
Income tax expense (40%)	156	268	296	272
Net earnings	$234	$402	$444	$408

An audit revealed that in determining these amounts, the ending inventory for 2016 was understated by $40.

Required -

1. Revise these statements of earnings to reflect the correct amounts.

2. Did the error affect the cumulative net earnings for the four-year period?

3. What effect did the error have on the income tax expense for 2016 and 2017?