Question

Data for Shelby Company for the current year is as follows: Sales Revenue $10,000 Cost of Goods Sold: Beginning Merchandise Inventory $3,000 Net Cost of Purchases 7,000 Cost of Goods Available for Sale 10,000 Less: Ending Merchandise Inventory 2,000 Cost of Goods Sold 8,000 Gross Profit $2,000 Assume that the ending Merchandise Inventory was accidentally overstated by $500. What are the correct amounts for Cost of Goods Sold and Gross Profit?

Answer 1

$8,500 and $1,500

Step-by-step explanation:

The computation of the corrected amount for the cost of goods sold and the gross profit is shown below:

Since the ending inventory is overstated by $500 that means it is extra added so we deduct this amount from the ending inventory i.e

= $2,000 - $500

= $1,500

Now the cost of goods sold is

= Sales revenue - ending inventory

= $10,000 - $1,500

= $8,500

And, as we know that

Gross profit = Sales revenue - the cost of goods sold

= $10,000 - $8,500

= $1,500