Question

S6-9 (similar to) E Question Help California Pool Supplies's merchandise inventory data for the year ended December 31, 2019, follow: E: (Click the icon to view the inventory data.) Read the requirements Requirement 1. Assume that the ending merchandise inventory was accidentally overstated by $2,000. What are the correct amounts for cost of goods sold and gross profit? Cost of goods sold in 2019 would be $ x Data Table Requirements - X $ 72,000 Sales Revenue Cost of Goods Sold: Beginning Merchandise Inventory $ 4,700 1. Assume that the ending merchandise inventory was accidentally overstated by $2,000. What are the correct amounts for cost of goods sold and gross profit? Net Cost of Purchases 32,200 Cost of Goods Available for Sale 36,900 2. How would the inventory error affect California Pool Supplies's cost of goods sold and gross profit for the year ended December 31, 2020, if the error is not corrected in 2019? 3,900 Less: Ending Merchandise Inventory Cost of Goods Sold 33,000 39,000 $ Print Done Gross Profit Print Done Enter any number in the edit fields and then click Check Answer. parts remaining Clear All Check Answer

Answer 1

Amount $ 72,000 a) Correct cost of goods sold and gross profit :- Particulars Amount $ Sales Revenue Less: Cost of goods sold Beginning merchandise inventory 4,700 Add: Net cost of purchases 32,200 Cost of goods available for sale 36,900 Less: Ending merchandise inventory (1,900) (3900-2000) Cost of goods sold Gross Profit 35,000 37,000 Corrected cost of goods sold is $ 35,000/- Corrected gross profit is $ 37,000/. b) Closing inventory of 2019 is higher which means opening inventory for 2020 will be higher by $ 2,000/. If opening inventory for 2020 is higher then the Cost of Good Sold for 2020 will be higher by $ 2,000 and Gross profit will be lower by same amount of $ 2,000/- Cost of goods sold in 2020 will be higher by $ 2,000/ Gross profit for 2020 will be lower by $ 2,000/.