Grants Corporation prepared the following two income statements (simplified for illustrative purposes):

	First Quarter						Second Quarter
Sales revenue			$	12,500							$	19,100
Cost of goods sold
Beginning inventory	$ 3,700						$	3,200
Purchases	2,800							12,300
Goods available for sale	6,500							15,500
Ending inventory	3,200							9,900
Cost of goods sold				3,300								5,600
Gross profit				9,200								13,500
Expenses				4,900								5,500
Pretax income			$	4,300							$	8,000

During the third quarter, it was discovered that the ending inventory for the first quarter should have been $3,670.

Required:

1. What effect did this error have on the combined pretax income of the two quarters?

2. Which quarter's or quarters' (if any) EPS amounts were affected by this error?

3. Prepare corrected income statements for each quarter.

4. Prepare the schedule to reflect the comparative effects of the correct and incorrect amounts on the income statement.