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

During the third quarter, it was discovered that the ending inventory for the first quarter should have been $4,280.

Required:
1. What effect did this error have on the combined pretax income of the two quarters? Explain.
2. Did this error affect the EPS amounts for each quarter? Explain.
3. Prepare corrected income statements for each quarter.
4. Set up a schedule with the following headings to reflect the comparative effects of the correct and incorrect amounts on the income statement:

Transcribed Image Text:

Sales revenue Cost of goods sold Beginning inventory Purchases Goods available for sale Ending inventory Cost of goods sold Gross profit Expenses Pretax income FIRST QUARTER $12,800 $4,200 2,800 7,000 3,700 3,300 9,500 4,800 $ 4,700 SECOND QUARTER $ 3,700 12,200 15,900 9,000 $18,300 6,900 11,400 5,300 $ 6,100