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EXHIBIT 2 (continued) Panel B: Statements of Operations Statements of Operations for the year ended July 31 (In thousand dollars, except per share amounts) 2011

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EXHIBIT 2 (continued) Panel B: Statements of Operations Statements of Operations for the year ended July 31 (In thousand dollars, except per share amounts) 2011 2010 Originally Effect of Effect of reported error Revised Originally error Revised correction amount reported correction am Net sales 965,922 680,162 Cost of sales 714,775 519,161 Gross profit 251,147 161,001 Operating expenses: Selling, general and administrative 96,960 64,301 Advertising 44,415 32,962 Acquisition and integration related expenses 16,792 11,508 Total operating expenses 158,167 108,771 Income from operations 92,980 52,230 Interest expense, net 23,840 10,180 Other 1,849 Income before income taxes 69,140 40,201 Income taxes (tax benefit) 18,929 13,990 Net income (loss) 50,211 26,211 Weighted average number of shares 22,000 18,700 Earnings per share 2.28 1.40 (ii ) Approximately 88 percent of the inventory purchased by Diamond is sold in the year of purchase, the remaining 12 percent being carried in inventory to the following fiscal year. (b) Continue with Requirement 5(a) above. Assume that the accounting errors are discovered on September 15, 2011, before Diamond's books for fiscal 2011 are closed for SEC filing purposes. Present a journal entry to record the error correction. (c) Continue with Requirement 5(a) above. Assume that the accounting errors are discovered on September 25, 2011, after Diamond's books for fiscal 201 1 are closed. Present a journal entry to record the error correction. (d) An article in the Wall Street Journal of September 27, 201 1 stated, "Anytime companies make extraordinary payments to suppliers, there is an increased likelihood of financial shenanigans being used to shift expenses and cash flows between periods to manipulate the appearance of the company's financial statements" (Wall Street Journal 2011). Do you

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