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Chapter 6: Q5TI (page 345)

The Shirley’s Gourmet Foods’ merchandise inventory data for the year ended December 31, 2018, follow:

Net Sales Revenue

\( 48,000

Cost of Goods Sold:

Beginning Merchandise Inventory

\) 3,360

Net Cost of Purchases

21,280

Cost of Goods Available for Sale

24,640

Less: Ending Merchandise Inventory

4,960

Cost of Goods Sold

19,680

Gross Profit

\( 28,320

Assume that the ending merchandise inventory was accidentally overstated by \)1,920. What are the correct amounts for cost of goods sold and gross profit?

Short Answer

Expert verified

Correct COGS: $21,600

Correct Gross Profit: $26,400

Step by step solution

01

Correct amount of COGS

As the ending inventory has been overstated by $1,920, then the COGS must have been understated by the same amount. So to compute the correct amount for COGS, COGS must be adjusted for the error amount.

CorrectCOGS=CurrentCOGS+ErrorAmount=$19,680+$1,920=$21,600

02

Correct amount of Gross profit

Correctgrossprofit=NetSalesRevenue-CorrectCOGS=$48,000-$21,600=$26,400

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