Dalez 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 \(\$ 4,200\).

Required:
1. What effect did this error have on the combined pretax profit of the two quarters? Explain.
2. Did this error affect the earnings per share amounts for each quarter? (See the discussion of earnings per share in Chapter 6.) 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:

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First Quarter 2011 Second Quarter 2011 Sales revenue $11,000 $18,000 Cost of sales Beginning inventory $4,000 $3,800 Purchases 3,000 13.000 Cost of goods available for sale 7,000 16,800 Ending inventory 3,800 9,000 Cost of sales 3,200 7,800 Gross profit 7,800 Expenses (operating) 5,000 Pretax profit $ 2,800 10,200 6,000 $ 4,200