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What effect did this error have on the combined pretax income of the two quarters?> Which quarter's or quarters' (if any) EPS amounts were affected by this error? Prepare corrected income statements for each quarter.

What effect did this error have on the combined pretax income of the two quarters?> Which quarter's or quarters' (if any) EPS amounts were affected by this error? Prepare corrected income statements for each quarter.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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E7-15 (Static) Analyzing and Interpreting the Impact of an Inventory Error LO7-5 Grants Corporation prepared the following two income statements (simplified for illustrative purposes): Second Quarter Sales revenue Cost of goods sold Beginning inventory Purchases Goods available for sale Ending inventory Cost of goods sold Gross profit First Quarter $ 4,000 3,000 7,000 3,800 $ 11,000 3,200 7,800 5,000 $ 2,800 $ 3,800 13,000 16,800 9,000 $ 18,000 7,800 10,200 6,000 $ 4,200 Expenses Pretax income During the third quarter, it was discovered that the ending inventory for the first quarter should have been $4,400. Required: What effect did this error have on the combined pretax income of the two quarters?> Which quarter's or quarters' (if any) EPS amounts were affected by this error? Prepare corrected income statements for each quarter. Prepare the schedule to reflect the comparative effects of the correct and incorrect amounts on the income statement
Transcribed Image Text:E7-15 (Static) Analyzing and Interpreting the Impact of an Inventory Error LO7-5 Grants Corporation prepared the following two income statements (simplified for illustrative purposes): Second Quarter Sales revenue Cost of goods sold Beginning inventory Purchases Goods available for sale Ending inventory Cost of goods sold Gross profit First Quarter $ 4,000 3,000 7,000 3,800 $ 11,000 3,200 7,800 5,000 $ 2,800 $ 3,800 13,000 16,800 9,000 $ 18,000 7,800 10,200 6,000 $ 4,200 Expenses Pretax income During the third quarter, it was discovered that the ending inventory for the first quarter should have been $4,400. Required: What effect did this error have on the combined pretax income of the two quarters?> Which quarter's or quarters' (if any) EPS amounts were affected by this error? Prepare corrected income statements for each quarter. Prepare the schedule to reflect the comparative effects of the correct and incorrect amounts on the income statement
Required 1 and 2 1. What effect did this error have on the combined pretax income of th 2. Which quarter's or quarters' (if any) EPS amounts were affected by 1. Effect on combined pretax income 2. Quarter(s) Required 1 and 2 Prepare corrected income statements for each quarter. Cost of goods sold: Required 1 and 2 Required 3 Goods available for sale Cost of goods sold Required 3 Required 3 Required 4 Beginning inventory Ending inventory Cost of goods sold Gross profit Pretax income Incorrect Required 4 Required 4 Correct $ 4,000 $ 4,000 First Quarter First Quarter 0 < Required 1 and 2 Prepare the schedule to reflect the comparative effects of the correct and incorrect amounts on the income statement. Second Quarter Error Required 1 and 2 < Required 3 Incorrect Second Quarter 9,000 Correct 0 Required 4 > 9,000 Required 4 > Error
Transcribed Image Text:Required 1 and 2 1. What effect did this error have on the combined pretax income of th 2. Which quarter's or quarters' (if any) EPS amounts were affected by 1. Effect on combined pretax income 2. Quarter(s) Required 1 and 2 Prepare corrected income statements for each quarter. Cost of goods sold: Required 1 and 2 Required 3 Goods available for sale Cost of goods sold Required 3 Required 3 Required 4 Beginning inventory Ending inventory Cost of goods sold Gross profit Pretax income Incorrect Required 4 Required 4 Correct $ 4,000 $ 4,000 First Quarter First Quarter 0 < Required 1 and 2 Prepare the schedule to reflect the comparative effects of the correct and incorrect amounts on the income statement. Second Quarter Error Required 1 and 2 < Required 3 Incorrect Second Quarter 9,000 Correct 0 Required 4 > 9,000 Required 4 > Error
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