Question

Bren Co.'s beginning inventory at January 1, 2005 was understated by $26,000, and its ending inventory was overstated by $52,000. As a result, Bren's cost of goods sold for 2005 was: Understated by $78,000. Overstated by $78,000. Understated by $26,000. Overstated by $26,000.

Answer 1

Answer:

Understated by $78,000

Explanation:

Given the above information,

We would sum up the beginning inventory of $26,000 that was understated on January 1 with the ending inventory of $52,000 that was overstated on December 31.

= $26,000 + $52,000

= $78,000

It is to be noted that understatement of beginning inventory and the over statement of ending inventory causes cost of goods sold to be understated by $78,000