Question

Splish Enterprises reported cost of goods sold for 2020 of $1,383,800 and retained earnings of $4,981,700 at December 31, 2020. Splish later discovered that its ending inventories at December 31, 2019 and 2020, were overstated by $103,730 and $34,580, respectively. Determine the corrected amounts for 2020 cost of goods sold and December 31, 2020, retained earnings. Corrected cost of goods sold

Answer 1

COGS = 1,314,630 $

RE = 4,947,120 $

Explanation:

In order to do this, you only need to do sum and substract.

First, let's determine the Corrected Cost of Goods Sold, which I will call COGS. This is the sum and substract of inventory, purchases and ending inventory:

COGS = BeginningInventory + Purchases - EndingInventory

COGS = BI + P - EI

The BI would be 1,383,800$. We don't have purchases here at the moment.

The EI would be the substract between 103,750 and 34580. In this case:

103,750 - 34,580 = 69,170$

So the corrected amounts of COGS would be:

COGS = 1,383,800 - 69,170 = 1,314,630 $

Now, for the retained earnings, we just need to substract the value of the retained earning with the ending inventory by the end of 2020, which is 34,580$, so the retained earning would be:

RE = 4,981,700 - 34,580 = 4,947,120 $