Swifty’s Hardware reported cost of goods sold as follows. 2018 2019 $ 21,500 $ 3
ID: 3145866 • Letter: S
Question
Swifty’s Hardware reported cost of goods sold as follows.
2018
2019
$ 21,500
$ 31,000
153,000
203,500
174,500
234,500
31,000
35,000
$143,500
$199,500
Swifty’s made two errors: (1) 2018 ending inventory was overstated $3,600, and (2) 2019 ending inventory was understated $6,550.
Compute the correct cost of goods sold for each year.
2018
2019
Beginning inventory$ 21,500
$ 31,000
Cost of goods purchased153,000
203,500
Cost of goods available for sale174,500
234,500
Ending inventory31,000
35,000
Cost of goods sold$143,500
$199,500
Explanation / Answer
1)
overstated means actual cost is lower than the reported one
Hence
correct cost of 2018 ending inventory = Reported cost - overstated
= 31,000 - 3600
= 27,400
2)
understated means actual cost is higher than the reported one
Hence
correct cost of 2019 ending inventory = Reported cost + understated
= 35,000 + 6550
= 41,550
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