3. What effect would the error have had on the income tax expense assuming a 30 percent average rate? Income Tax Expense 2017 2018 Required information P7-9 (Algo) Analyzing and Interpreting the Effects of Inventory Errors LO7-7 [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 $ 2,039,000 1,503,000 536,000 474,000 62,000 18,600 $ 43,400 2017 $ 2,469,000 1,611,000 858,000 497,000 361,000 108,300 $ 252, 700 2018 $ 2,710,000 1,780,000 930,000 529,000 401,000 120, 300 $ 280, 700 2019 $ 2,990,000 2,095,000 895,000 532,000 363,000 108,900 $ 254,100 An audit revealed that in determining these amounts, the ending inventory for 2017 was overstated by $26,000. The company uses a periodic inventory system. P7-9 Part 1 Required: 1. Prepare the income statements to reflect the correct amounts, taking into consideration the inventory error. PRUITT COMPANY Income Statement For the Four-Year Period 2017 2016 2018 2019 Sales revenue Cost of goods sold Gross profit Expenses Pretax income Income tax expense (30%) Net income 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 % % % %