Grants corporation prepared the following two income statements (simplified for illustrative purposes): first quarter second quarter sales revenue $ 11,000 $ 18,000 cost of goods sold beginning inventory $ 4,000 $ 3,800 purchases 3,000 13,000 goods available for sale 7,000 16,800 ending inventory 3,800 9,000 cost of goods sold 3,200 7,800 gross profit 7,800 10,200 expenses 5,000 6,000 pretax income $ 2,800 $ 4,200 during the third quarter, it was discovered that the ending inventory for the first quarter should have been $4,400. 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.