Question

Tamarisks Hardware reported cost of goods sold as follows. 2019 2020 Beginning inventory $ 23,000 $ 33,500 Cost of goods purchased 153,500 191,500 Cost of goods available for sale 176,500 225,000 Ending inventory 33,500 37,500 Cost of goods sold $143,000 $187,500 Tamarisk made two errors: (1) 2019 ending inventory was overstated $3,500, and (2) 2020 ending inventory was understated $6,500. Compute the correct cost of goods sold for each year.

Answer 1

Answer:

$146,500; $194,000

Explanation:

(1) Correct amount of cost of goods sold for 2019:

= Beginning inventory + Cost of goods purchased - Correct ending inventory

= $23,000 + $153,500 - (Ending inventory value - Overstated value)

= $23,000 + $153,500 - ($33,500 - $3,500)

= $23,000 + $153,500 - $30,000

= $146,500

(2) Correct amount of cost of goods sold for 2020:

= Beginning inventory + Cost of goods purchased - Correct ending inventory

= $33,500 + $191,500 - (Ending inventory value - Understated value)

= $33,500 + $191,500 - ($37,500 - $6,500)

= $33,500 + $191,500 - $31,000

= $194,000