Question

Novak Hardware reported cost of goods sold as follows. 2022 2021 Beginning inventory $ 34,500 $ 21,000 Cost of goods purchased 177,000 155,000 Cost of goods available for sale 211,500 176,000 Less: Ending inventory 36,000 34,500 Cost of goods sold $175,500 $141,500 Novak made two errors: 1. 2021 ending inventory was overstated by $3,450. 2. 2022 ending inventory was understated by $6,350. Compute the correct cost of goods sold for each year.

Answer 1

Answer: See explanation

Explanation:

The correct cost of goods sold for 2021 will be:

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

= 34500 + 177000 - 32550

= 178950

The correct cost of goods sold for 2022 will be:

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

= 32550 + 155000 - 40850

= 146700

Note:

Correct ending inventory for 2021 will be: = Ending inventory - Overstated value

= 36000 - 3450

= 32550

Correct ending inventory for 2021 will be: = Ending inventory + Understated value

= 34500 + 6350

= 40850