Question

Poppy co. uses a periodic inventory system. beginning inventory on january 1 was understated by $30,000, and its ending inventory on december 31 was understated by $17,000. in addition, a purchase of merchandise costing $20,000 was incorrectly recorded as a $2,000 purchase. none of these errors were discovered until the next year. as a result, poppy's cost of goods sold for this year was:

Answer 1

If  None of these errors were discovered until the next year. As a result, Poppy's cost of goods sold for this year was: Understated by $31,000.

Cost of goods sold

Using this formula

Cost of goods sold=Beginning inventory + Incorrect entry for Merchandize Purchase - Ending inventory

Let plug in the formula

Cost of goods sold=$30,000+($20,000-$2,000)-$17,000

Cost of goods sold=$30,000+$18,000-$17,000

Cost of goods sold=$31,000 understated

Therefore Poppy's cost of goods sold for this year was: Understated by $31,000.

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