Question

Swifty Enterprises reported cost of goods sold for 2020 of $1,453,700 and retained earnings of $5,392,600 at December 31, 2020. Swifty later discovered that its ending inventories at December 31, 2019 and 2020, were overstated by $102,820 and $37,880, respectively. Determine the corrected amounts for 2020 cost of goods sold and December 31, 2020, retained earnings.

Answer 1

Answer:

Corrected cost of goods sold $1,388,760

Corrected retained earnings $5,354,720

Explanation:

First, we need to determine corrected cost of goods sold

Corrected cost of goods sold at December 31, 2020

= Beginning inventory - Purchases - Ending inventory

= $1,453,700 - [$102,820 - $37,880]

= $1,453,700 - $64,930

= $1,388,760

The December 31,2020 corrected retained earnings would be computed as;

= Ending retained earnings - Overstated ending inventories at December 31, 2020

= $5,392,600 - $37,880

= $5,354,720