Question

Sheridan Enterprises reported cost of goods sold for 2020 of $1,322,900 and retained earnings of $4,854,000 at December 31, 2020. Sheridan later discovered that its ending inventories at December 31, 2019 and 2020, were overstated by $106,470 and $36,820, respectively. Determine the corrected amounts for 2020 cost of goods sold and December 31, 2020, retained earnings.

Answer 1

Answer:

See below

Explanation:

1. Corrected amounts for 2020 cost of goods sold

= Cost of goods sold for 2020 - December 31, 2019 ending inventories overstated + December 31, 2020 ending inventories overstated

= $1,322,900 - $106,470 + $36,820

= $1,253,250

2. Correct amounts for December 31, 2020 retained earnings

= Retained earnings December 31, 2020 - December 31, 2020 ending inventories overstated

= 4,854,000 - $36,820

= $4,817,180