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Q.8-10BE

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Found in: Page 423

### Intermediate Accounting (Kieso)

Book edition 16th
Author(s) Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield
Pages 1552 pages
ISBN 9781118743201

# Bienvenu Enterprises reported cost of goods sold for 2017 of $1,400,000 and retained earnings of$5,200,000 at December 31, 2017. Bienvenu later discovered that its ending inventories at December 31, 2016 and 2017, were overstated by$110,000 and$35,000, respectively. Determine the corrected amounts for 2017 cost of goods sold and December 31, 2017,retained earnings.

Corrected COGS and retained earnings are $1,325,000 and$5,275,000, respectively.

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## Correct amount of cost of goods sold for 2017

As the ending inventory for 2016 is overstated by $110,000, the opening inventory for 2017 would have the same effect. The ending inventory for 2017 is overstated by$35,000.

## Correct amount of retained earnings for 2017

As the COGS has been overstated, there would be an opposite effect on the retained earnings. Thus the retained earnings have been underestimated.

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