Question
Dallas Corporation prepared the following two income statements: First Quarter Second Quarter Sales Revenue $ 21,000 $ 25,200 Cost of Goods Sold Beginning Inventory $
Dallas Corporation prepared the following two income statements: First Quarter Second Quarter Sales Revenue $ 21,000 $ 25,200 Cost of Goods Sold Beginning Inventory $ 4,200 $ 5,200 Purchases 8,200 13,200 Goods Available for Sale 12,400 18,400 Ending Inventory 5,200 10,200 Cost of Goods Sold 7,200 8,200 Gross Profit 13,800 17,000 Operating Expenses 6,200 7,200 Income from Operations $ 7,600 $ 9,800
During the third quarter, the companys internal auditors discovered that the ending inventory for the first quarter should have been $6,100. The ending inventory for the second quarter was correct.
First Quarter | Second Quarter | |||||||||||
Sales Revenue | $ | 21,000 | $ | 25,200 | ||||||||
Cost of Goods Sold | ||||||||||||
Beginning Inventory | $ | 4,200 | $ | 5,200 | ||||||||
Purchases | 8,200 | 13,200 | ||||||||||
Goods Available for Sale | 12,400 | 18,400 | ||||||||||
Ending Inventory | 5,200 | 10,200 | ||||||||||
Cost of Goods Sold | 7,200 | 8,200 | ||||||||||
Gross Profit | 13,800 | 17,000 | ||||||||||
Operating Expenses | 6,200 | 7,200 | ||||||||||
Income from Operations | $ | 7,600 | $ | 9,800 | ||||||||
Required:
What effect would the error have on total Income from Operations for the two quarters combined?
What effect would the error have on Income from Operations for each of the two quarters?
Prepare corrected income statements for each quarter. Ignore income taxes.
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