Question

Nash Enterprises reported cost of goods sold for 2020 of $1,299,500 and retained earnings of $5,405,900 at December 31, 2020. Nash later discovered that its ending inventories at December 31, 2019 and 2020, were overstated by $120,230 and $32,640, respectively. Determine the corrected amounts for 2020 cost of goods sold and December 31, 2020, retained earnings.

Answer 1

Cost of goods sold $1,211,910

Retained earnings $5,373,260

Step-by-step explanation:

Calculation to Determine the corrected amounts for 2020 cost of goods sold

Using this formula

2020 cost of goods sold corrected amount = Beginning Inventory + Purchases - Ending Inventory

Let plug in the formula

2020 cost of goods sold corrected amount =[$1,299,500-(-$120,230+$32,640)

2020 cost of goods sold corrected amount = $1,299,500-$87,590

2020 cost of goods sold corrected amount=$1,211,910

Therefore the corrected amounts for 2020 cost of goods sold will be $1,211,910

Calculation to Determine the corrected amounts for December 31, 2020, retained earnings.

Revised retained earnings = $5,405,900 - $32,640

Revised retained earnings = $5,373,260

Therefore the corrected amounts for December 31, 2020, retained earnings will be $5,373,260