Required information [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 2018 2019 2016 Sales revenue Cost of goods sold $ 2,041,000 1,503,000 $ 2,452,000 1,624,000 $ 2,702,000 $ 2,990,000 1,770,000 2,108,000 Gross profit 538,000 828,000 932,000 882,000 Expenses 482,000 501,000 537,000 535,000 Pretax income 56,000 327,000 395,000 347,000 Income tax expense (40%) 22,400 130,800 158,000 138,800 Net income $ 33,600 $ 196,200 $ 237,000 $ 208,200 An audit revealed that in determining these amounts, the ending inventory for 2017 was overstated by $20,000. The company uses a periodic inventory system. Required: 1. Prepare the income statements to reflect the correct amounts, taking into consideration the inventory error. Sales revenue Cost of goods sold Gross profit Expenses Pretax income Income tax expense (40%) Net income PRUITT COMPANY Income Statement For the Four-Year Period 2016 2017 2018 2019 ! Required information [The following information applies to the questions displayed below.] The income statement for Pruitt Company summarized for a four-year period shows the following: 2018 2019 2016 2017 Sales revenue $ 2,041,000 Cost of goods sold Gross profit 1,503,000 538,000 $ 2,452,000 1,624,000 $ 2,702,000 1,770,000 $ 2,990,000 2,108,000 828,000 932,000 882,000 Expenses 482,000 501,000 537,000 535,000 Pretax income 56,000 327,000 395,000 347,000 Income tax expense (40%) 22,400 130,800 158,000 138,800 Net income $ 33,600 $ 196,200 $ 237,000 $ 208,200 An audit revealed that in determining these amounts, the ending inventory for 2017 was overstated by $20,000. The company uses a periodic inventory system. 2. Compute the gross profit percentage for each year before the correction and after the correction. (Round your answers to the nearest whole percent.) 2016 2017 2018 2019 Before correction % % % % After correction % % % % Required information [The following information applies to the questions displayed below.] The income statement for Pruitt Company summarized for a four-year period shows the following: 2018 2016 2017 2019 Sales revenue Cost of goods sold $ 2,041,000 1,503,000 $ 2,452,000 $ 2,702,000 $ 2,990,000 1,624,000 1,770,000 2,108,000 Gross profit 538,000 828,000 932,000 882,000 Expenses 482,000 501,000 537,000 535,000 Pretax income 56,000 327,000 395,000 347,000 Income tax expense (40%) 22,400 130,800 158,000 138,800 Net income $ 33,600 $ 196,200 $ 237,000 $ 208,200 An audit revealed that in determining these amounts, the ending inventory for 2017 was overstated by $20,000. The company uses a periodic inventory system. 3. What effect would the error have had on the income tax expense assuming a 40 percent average rate? Income Tax Expense 2017 2018