Grants Corporation prepared the following two income statements (simplified for illustrative purposes) First Quarter $ 11,300 Second Quarter $ 18,900 Sales revenue Cost of goods sold Beginning inventory Purchases $ 3,700 2,800 $ 3,900 12,700 Goods available for sale 6,500 3,900 16,600 9,700 Ending inventory Cost of goods sold Gross profit Expenses 2,600 8,700 4,700 6,900 12,000 5,200 $ 4,000 6,800 Pretax income During the third quarter, it was discovered that the ending inventory for the first quarter should have been $4,450 Required 1. What effect did this error have on the combined pretax income of the two quarters? Increase by $550 Decrease by $550 No effect 2. Which quarter's (if any) EPS amount were affected by this error? First Quarter only Second Quarter only Both quarters Neither quarter 3. Prepare corrected income statements for each quarter Answer is complete but not entirely correct. First Quarter Second Quarter $ 18,900 Sales revenue 11.300 Cost of goods sold $ 3,700 2,800 $ 3,900 Beginning inventory 2,700 Purchases Goods available for sale 6,500 16,600 9,700 Ending inventory 3,900 2,600 6,900 Cost of goods sold Gross proft 8,700 12,000 5,200 4,700 Operating expenses 4,000 S 6,800 Pretax income 4. Prepare the schedule to reflect the comparative effects of the correct and incorrect amounts on the income statement. 1st Quarter 2nd Quarter Incorrect Correct Error Incorrect Correct Error Beginning inventory Ending inventory Cost of goods sold Gross profit Pretax income