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Grants Corporation prepared the following two income statements (simplified for illustrative purposes): ...

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Accounting

Grants Corporation prepared the following two income statements (simplified for illustrative purposes):

First Quarter Second Quarter
Sales revenue $ 11,600 $ 19,700
Cost of goods sold
Beginning inventory $ 3,600 $ 4,000
Purchases 2,600 12,800
Goods available for sale 6,200 16,800
Ending inventory 4,000 9,200
Cost of goods sold 2,200 7,600
Gross profit 9,400 12,100
Expenses 4,100 5,600
Pretax income $ 5,300 $ 6,500

During the third quarter, it was discovered that the ending inventory for the first quarter should have been $4,420.

Required:

1. What effect did this error have on the combined pretax income of the two quarters?

2. Which quarter's or quarters' (if any) EPS amounts were affected by this error?

3. Prepare corrected income statements for each quarter.

4. Prepare the schedule to reflect the comparative effects of the correct and incorrect amounts on the income statement.

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