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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 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.
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