Question

Exercise 6-10

Splish Brothers’s Hardware reported cost of goods sold as follows.

		2019		2020
Beginning inventory		$ 23,500		$ 34,500
Cost of goods purchased		154,500		175,000
Cost of goods available for sale		178,000		209,500
Ending inventory		34,500		36,000
Cost of goods sold		$143,500		$173,500

Splish Brothers’s made two errors: (1) 2019 ending inventory was overstated $3,300, and (2) 2020 ending inventory was understated $6,450.

Compute the correct cost of goods sold for each year.

		2019		2020
Cost of goods sold		$		$

Answer 1

2019:

Correct Beginning Inventory = $23,500
Correct Cost of Goods Purchased = $154,500

Correct Ending Inventory = $34,500 - $3,300
Correct Ending Inventory = $31,200

Correct Cost of Goods Sold = Correct Beginning Inventory + Correct Cost of Goods Purchased - Correct Ending Inventory
Correct Cost of Goods Sold = $23,500 + $154,500 - $31,200
Correct Cost of Goods Sold = $146,800

2020:

Correct Beginning Inventory = $31,200
Correct Cost of Goods Purchased = $175,000

Correct Ending Inventory = $36,000 + $6,450
Correct Ending Inventory = $42,450

Correct Cost of Goods Sold = Correct Beginning Inventory + Correct Cost of Goods Purchased - Correct Ending Inventory
Correct Cost of Goods Sold = $31,200 + $175,000 - $42,450
Correct Cost of Goods Sold = $163,750