Spears & Cantrell announced inventory had been overstated by $ 30 at the end of its second quarter. The error wasn't discovered and corrected in the company's periodic inventory system until after the end of the third quarter. The following table shows the amounts that were originally reported by the company.
Required:
1. Restate the income statements to reflect the correct amounts, after fixing the inventory error.
2. Compute the gross profit percentage for each quarter (a) before the correction and (b) after the correction, rounding to the nearest percentage. Do the results lend confidence to your corrected amounts? Explain.