Question

2018 2019 Beginning inventory $ 21,000 $ 32,500 Cost of goods purchased 151,500 187,500 Cost of goods available for sale 172,500 220,000 Ending inventory 32,500 35,500 Cost of goods sold $140,000 $184,500 Bramble’s made two errors: (1) 2018 ending inventory was overstated $3,150, and (2) 2019 ending inventory was understated $6,250. Compute the correct cost of goods sold for each year.

Answer 1

Real COGS 143,150 178,250

Step-by-step explanation:

`\left[\begin{array}{ccc}-&2018&2019\\Beg.Inv&21,000&29,350\\Purchase&151,500&187,500\\Available&172,500&216,850\\End.Inv&32,500&35,500\\COGS&140,000&184,500\\Adj.End.Inv&-3,150&6,250\\Real COGS&143,150&178,250\\Real End-Inv&29,350&41,750\\\end{array}\right]`

When overstated, it means an inventory with a book value of 100 is really 95

When understated, it means an inventory with a book value of 100 is really 105

This makes the COGS lower than it should in the first case

and higher than it should in the second

Notice:

Because of 2018 adjustment, beginning and availalbe good must be recalculate for 2019