Dallas Corporation prepared the following two income statements:

During the third quarter, the company€™s internal auditors discovered that the ending inven-tory for the first quarter should have been $ 4,400. The ending inventory for the second quarter was correct.
Required:
1. What effect would the error have on total Income from Operations for the two quarters combined? Explain.
2. What effect would the error have on Income from Operations for each of the two quarters? Explain.
3. Prepare corrected income statements for each quarter. Ignore income taxes.

Transcribed Image Text:

First Quarter Second Quarter 15.000 Sales Revenue Cost of Goods Sold $18,000 s3,000 Beginning Inventory Purchases Goods Available for Sale Ending Inventory Cost of Goods Sold $ 4.000 12,000 6.000 ,000 10,000 6.000 Gross Profit Operating Expenses Income from Operations 9,000 11,000 4000 $5,000