7. value: 2.00 points Grants Corporation prepared the following two income statements (simplified for illustrative purposes) First Quarter Second Quarter Sales revenue Cost of goods sold Beginning inventory Purchases Goods available for sale Ending inventory Cost of goods sold Gross profit Expenses Pretax income $12,600 $ 18,300 $ 3,500 2,500 6,000 3,900 $ 3,900 12,800 16,700 9,000 2,100 10,500 4,200 $ 6,300 7,700 10,600 5,800 $ 4,800 During the third quarter, it was discovered that the ending inventory for the first quarter should have been $4,300 Required 1. What effect did this error have on the combined pretax income of the two quarters? Increase by $400 Decrease by $400 No effect 2. Which quarter's (if any) EPS amount were affected by this error? First Quarter only Second Quarter only Both quarters Neither quarter 3. Prepare corrected income statements for each quarter. First Quarter Second Quarter Cost of goods sold: Goods available for sale Cost of goods sold 4. Prepare the schedule to reflect the comparative effects of the correct and incorrect amounts on the income statement. 1st Quarter 2nd Quarter Incorrect Correct Error Incorrect Correct Error Beginning inventory Ending inventory Cost of goods sold Gross profit Pretax income