Question: Analyzing and Interpreting the Impact of an Inventory Error Houston Corporation prepared the same two income statements presented in problem. During the third quarter, the company's internal auditors discovered that the ending inventory for the first quarter should have been $3,600. The ending inventory for the second quarter was correct.
Required: 1. What effect would the error have on the total operating income for the two quarters combined? Explain.
2. What effect would the error have on the operating income for each of the two quarters? Explain.
3. Prepare corrected income statements for each quarter.
Problem: Analyzing and Interpreting the Impact of an Inventory Error Dallas Corporation prepared the following two income statements:
During the third quarter, the company's internal auditors discovered that the ending inventory 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 the total operating income for the two quarters combined? Explain.
2. What effect would the error have on the operating income for each of the two quarters? Explain.
3. Prepare corrected income statements for each quarter.