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

Grants Corporation prepared the following two income statements (simplified for illustrative purposes): First Quarter 2011 Second Quarter 2011 Sales revenue $ 12,400 $ 18,000 Cost of goods sold Beginning inventory $ 4,200 $ 3,400 Purchases 3,300 12,700 Goods available for sale 7,500 16,100 Ending inventory 3,400 10,000 Cost of goods sold 4,100 6,100 Gross profit 8,300 11,900 Expenses 4,700 5,400 Pretax income $ 3,600 $ 6,500 During the third quarter, it was discovered that the ending inventory for the first quarter should have been $3,930. Required: 1. What effect did this error have on the combined pretax income of the two quarters? Increase 530 Decrease 530 NE 2. Did this error affect the EPS amounts for each quarter? Yes No 3. Prepare corrected income statements for each quarter. (Input all amounts as positive values. Omit the “$” sign in your response.) First Quarter Second Quarter $ $ Cost of goods sold $ $ Cost of goods sold Pretax income $ $ 4. Prepare the schedule with the following headings to reflect the comparative effects of the correct and incorrect amounts on the income statement. (Select “No error” in case of no error.) 1st Quarter 2nd Quarter Income Statement Item Incorrect Correct Error Incorrect Correct Error Beginning inventory $ $ $ $ Ending inventory Cost of goods sold Gross profit Pretax income ReferenceseBook & Resources

 

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