The statements of earnings for four consecutive years for Colca Company reflected the following summarized amounts:

Subsequent to the development of these amounts, it has been determined that the physical inventory taken on December 31, 2014, was understated by $ 3,000.
Required:
1. Revise the statements of earnings to reflect the correct amounts, taking into consideration the inventory error.
2. Compute the gross profit percentage for each year
(a) Before the correction
(b) After the correction.
Do the results lend confidence to your corrected amounts? Explain. 3. What effect would the error have had on the income tax expense, assuming an average tax rate of 30 percent?

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2016 2015 2014 2013 Sales revenue$58,000 Cost of sales Gross profit Operating expenses Pretax earnings 1,000 $50,000 37000 43,000 35,000 32,500 17,500 10,000 7,500 21,000 12,000 9,000 19,000 14,000 5,000 16,000 12,000 $ 4,000