Grants Corporation prepared the following two income statements (simplified for illustrative purposes) First Quarter 2014 Second Quarter 2014 Sales revenue $ 13,000 $ 19,200 Cost of goods sold Beginning inventory $ 4,200 $ 3,300 Purchases 3,000 12,400 Goods available for sale Ending inventory 7,200 3,300 15,700 9,400 Cost of goods sold 3,900 6,300 Gross profit Expenses 9,100 4,600 12,900 5,300 Pretax income $ 4,500 $ 7,600 During the third quarter, it was discovered that the ending inventory for the first quarter should have been $3.750 Required: 1. What effect did this error have on the combined pretax income of the two quarters? Increase 450 Decrease 450 NE 3. Prepare corrected income statements for each quarter. Second Quarter Cost of goods sold: Goods available for sale 2 Cost of goods sold 4. Prepare the schedule with the following headings to reflect the comparative effects of the correct and amounts on the income statement. 4. Prepare the schedule with the following headings to reflect the comparative effects of the correct and incorrect amounts on the income statement. Incorrect 1st Quarter Correct Error I ncorrect 2nd Quarter Correct Error Beginning inventory Ending inventory Cost of goods sold Gross profit Pretax income HIR References eBook & Resources