10. value 1.00 points Grants Corporation prepared the following two income statements (simplified for illustrative purposes) First Quarter 2014 $12,900 Second Quarter 2014 $18,600 Sales revenue Cost of goods sold Beginning inventory Purchases $ 4,200 2,500 3,100 12,800 Goods available for sale 6,700 3,100 15.900 9,800 Ending inventory Cost of goods sold 3,600 6,100 Gross profit Expenses 9,300 4,000 12,500 5,700 Pretax income $ 5300 $ 6,800 During the third quarter, it was discovered that the ending inventory for the first quarter should have been $3,690. Required: 1. What effect did this error have on the combined pretax income of the two quarters? Increase 590 O Decrease 590 NE 2. Did this error affect the EPS amounts for each quarter? O Yes O No 3. Prepare corrected income statements for each quarter O Yes O No 3. Prepare corrected income statements for each quarter First Quarter Second Quarter Sales revenue $ 12,900 18,600 Cost of goods sold: Beginning inventory 4,200 3,690 12,800 $ Purchases 2,500 Goods available for sale 6,700 16,490 3,690 Ending inventory 3,010 Cost of goods sold Gross profit Operating expenses 9,890 5,700 4,000 5,890 $ 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 2nd Quarter Error 590 undor 1st Quarter Corect Incorrect Error Correct 3 690$ Incorrect -3,100 $ 0 4,200 4,200 $ Beginning inventory 590 under 3 690 $ Pretax income 5,890 4. Prepare the schedule with the following headings to reflect the comparative effects of the correct and incorrect amounts on the income statement 1st Quarter 2nd Quarter Incorrect Correct Incorrect Correct Error Erro 4,200 $ Beginning inventory Ending inventory 4,200 3,690 $ 3,690 $ $ 3,100 590 under 0 590 under 3,100 590 over 3,010 9,890 5,890 Cost of goods sold 3,600 9,300 5,300 590 under Gross profit 590 under Pretax income eBook & Resources References Hints Lenove