Question

Mount ValleyMount Valley

Bakery reported net sales revenue of

$ 37 comma 000$37,000

and cost of goods sold of

$ 11 comma 000$11,000.

Compute

Mount Valley'sMount Valley's

correct gross profit if the company made either of the following independent accounting errors.

a.  Ending merchandise inventory is overstated by

$ 3 comma 000$3,000.

b.  Ending merchandise inventory is understated by

$ 3 comma 000$3,000.

		Cost of Goods Sold and Gross Profit
		Corrected for the Error
		Ending Merchandise Inventory:
	As Reported—	(a) Overstated	(b) Understated
	Incorrect	by $3,000	by $3,000
Net sales revenue	$37,000	$37,000	$37,000
Cost of goods sold	11,000
Gross profit

Answer 1

in case ( a) when ending merchandise inventory is overstated by $ 3000 then cost of Goods sold is $ 14000 and gross profit is $ 23000(37000-14000=23000)

and in case (b) ending merchandise inventory is understated by $ 3000 then Cost of goods sold is $ 8000 and gross profit would be $ 29000 (37000-8000=29000)

Particulars	Ending merchandise inventory is overstated by $ 3000	Ending merchandise inventory is understated by $ 3000
Cost of Goods sold	$ 14000	$ 8000
Gross profit	$ 23000	$ 29000