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	2021			2020			2019			2018
Sales revenue	$
Cost of sales
Gross profit
Operating expenses
Pretax earnings
Income tax expense (30%)
Net earnings

An audit revealed that in determining these amounts, the ending inventory for 2019 was understated by $48.

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.)

	2021			2020			2019			2018
Sales revenue	$	3,325		$	3,750		$	4,000		$	4,275
Cost of sales		2,155			2,277			2,432			2,763
Gross profit		1,170			1,473			1,568			1,512
Operating expenses		620			643			668			672
Pretax earnings		550			830			900			840
Income tax expense (30%)		165			249			270			252
Net earnings	$	385		$	581		$	630		$	588

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

multiple choice

• Not affected

• Affected

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.)

Answer & Explanation Solved by verified expert

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