E7-19 (Algo) (Supplement 7B) Analyzing and Interpreting the Impact of an Inventory Error [LO 7-S2] Dallas Corporation prepared the following two income statements: First Quarter $ 16,000 Second Quarter $ 19,200 Sales Revenue Cost of Goods Sold Beginning Inventory Purchases Goods Available for Sale Ending Inventory Cost of Goods Sold Gross Profit Operating Expenses Income from Operations $ 3,200 7,200 10,400 4,200 $ 4,200 12,200 16,400 9,200 6,200 9,800 5,200 $ 4,600 7,200 12,000 6,200 $ 5,800 During the third quarter, the company's internal auditors discovered that the ending inventory for the first quarter should have been $4,600. The ending inventory for the second quarter was correct. Required: 1. What effect would the error have on total Income from Operations for the two quarters combined? 2. What effect would the error have on Income from Operations for each of the two quarters? 3. Prepare corrected income statements for each quarter. Ignore income taxes. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 What effect would the error have on total Income from Operations for the two quarters combined? Two Quarters Combined No Effect E7-19 (Algo) (Supplement 7B) Analyzing and Interpreting the Impact of an Inventory Error [LO 7-S2] Dallas Corporation prepared the following two income statements: First Quarter $ 16,000 Second Quarter $ 19, 200 Purchases Sales Revenue Cost of Goods Sold Beginning Inventory Goods Available for Sale Ending Inventory Cost of Goods Sold Gross Profit Operating Expenses Income from Operations $ 3,200 7,200 10,400 4,200 $ 4,200 12,200 16,400 9,200 6,200 9,800 5,200 $ 4,600 7,200 12,000 6,200 $ 5,800 During the third quarter, the company's internal auditors discovered that the ending inventory for the first quarter should have been $4,600. The ending inventory for the second quarter was correct. Required: 1. What effect would the error have on total income from Operations for the two quarters combined? 2. What effect would the error have on Income from Operations for each of the two quarters? 3. Prepare corrected income statements for each quarter. Ignore income taxes. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 What effect would the error have on Income from Operations for each of the two quarters? $ 420 First Quarter Second Quarter Income from Operations Understated by Income from Operations Overstated by $ 620