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Horngren'S Financial And Managerial Accounting
Found in: Page 359

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Short Answer

Question: New York Pool Supplies’s merchandise inventory data for the year ended December 31, 2019, follow:

Net Sales Revenue$ 58,000

Cost of Goods Sold:

Beginning Merchandise Inventory$ 4,900

Net Cost of Purchases 32,500

Cost of Goods Available for Sale37,400

Less: Ending Merchandise Inventory 4,700

Cost of Goods Sold32,700

Gross Profit $ 25,300

Requirements

1. Assume that the ending merchandise inventory was accidentally overstated by$1,800. What are the correct amounts for cost of goods sold and gross profit?

The correct value of COGS and gross profit is $34,500 and $23,500 respectively.

See the step by step solution

Step by Step Solution

Step-by-Step-SolutionStep1: Correct value of the cost of goods sold

As the ending inventory has been overstated by $1,800, so the COGS would be understated by the same amount.

So the correct value of COGS would be as follow –

Step 2: Correct value of gross profit

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