Question

Errors in Inventory Counts

The following information was taken from the records of Tinker Enterprises:

	2019	2018
Beginning inventory	$60,000	$50,000
Cost of goods purchased	420,000	400,000
Cost of goods available for sale	480,000	450,000
Ending inventory	55,000	60,000
Cost of goods sold	$425,000	$390,000

The following two errors were made in the physical inventory counts:
1. 2018 ending inventory was understated by $8,000.
2. 2019 ending inventory was overstated by $4,000.
Compute the correct cost of goods sold for both 2018 and 2019.

Answer 1

Solution

	2,019	2,018
Cost of goods sold	$ 437,000.00	$ 382,000.00

Working

	2019	2018
Beginning inventory	$    68,000.00	$ 50,000.00
Cost of goods purchased	$ 420,000.00	$ 400,000.00
Cost of goods available for sale	$ 488,000.00	$ 450,000.00
Ending inventory	$    51,000.00	$ 68,000.00*
Cost of goods sold	$ 437,000.00	$ 382,000.00

*60000+8000 = $68000 is correct ending inventory of 2018.

If 2018 ending inventory is understated then 2019 beginning inventory is understated too. So that changes too.