Question

Boston 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 $1,400. What are the correct amounts for cost of goods sold and gross profit? Cost of goods sold in 2019 would be S What is the correct amount of gross profit? Gross profit in 2019 would be $ Requirement 2. How would the inventory error affect Boston 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? by $ Cost of goods sold for 2020 would be How would the inventory error affect Boston Pool Supplies's gross profit for the year ended December 31, 2020, if the error not corrected in 2019? by $ Gross profit for 2020 would be - X i Data Table Sales Revenue $ 61,000 Cost of Goods Sold: Beginning Merchandise Inventory $ 3,600 42,400 Net Cost of Purchases Cost of Goods Available for Sale 46,000 Less: Ending Merchandise Inventory 4,900 41,100 Cost of Goods Sold 19,900 Gross Profit

Answer 1

	DATA GIVEN,
	Sales Revenue		$                           61,000
	Less: Cost of Goods Sold
	Beginning Merchandise Inventory	$                         3,600
	Net Cost of Purchases	$                       42,400
	Cost of Goods Available For Sales	$                       46,000
	Less: Ending inventory	$                         4,900
	Cost of Goods Sold		$                           41,100
	Gross Profit		$                           19,900
	ENDING INVENTORY IS OVERSTATED BY $ 1,400 IT MEANS INVENTORY IS SHOWN IN ENDING IS
	AT HIGHER VALUE.
	CORRECTED COST OF GOODS SOLD IS AS BELOW
	Sales Revenue		$                           61,000
	Less: Cost of Goods Sold
	Beginning Merchandise Inventory	$                         3,600
	Net Cost of Purchases	$                       42,400
	Cost of Goods Avialable For Sales	$                       46,000
	Less: Ending inventory ($ 4,900 - $ 1400)	$                         3,500
	Cost of Goods Sold		$                           42,500
	Gross Profit		$                           18,500
	Answer =
	Requirement 1:
	Cost of Goods Sold in 2019 would be	$                       42,500
	Gross Profit in 2019 would be	$                       18,500
	Requirement 2:
	If closing inventory is high than it means opening inventory of 2020 is higher by $ 1400.
	And if opening inventory is higher than the Cost of Good Sold will be higher and Gross profit
	will be reduced by the same amount that is $ 1400
	So Cost of Goods Sold 2020 would be = Increased by $ 1400
	Gross Profit for 2020 would be Decreased by $ 1,400