Analyzing and Interpreting the Impact of an Inventory Error Grants Corporation prepared the following two income statements (simplified for illustrative purposes): 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? Explain.2. Did this error affect

Chapter 7, Exercises #19
Analyzing and Interpreting the Impact of an Inventory Error Grants Corporation prepared the following two income statements (simplified for illustrative purposes):

First Quarter 2011 Second Quarter 2011 Sales revenue S11,000 $18,000 Cost of goods sold $ 3,800 $4,000 Beginning invento

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? Explain.
2. Did this error affect the EPS amounts for each quarter? (See Chapter 5 for discussion of EPS.) Explain.
3. Prepare corrected income statements for each quarter.
4. Set up a schedule with the following headings to reflect the comparative effects of the correct and incorrect amounts on the incomestatement:

Analyzing and Interpreting the Impact of an Inventory Error Gran
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...

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Financial Accounting

7th Edition

Authors: LibbyShort

ISBN: 978-0078111020

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