Asked by Anika Singh on May 28, 2024
Verified
Galena Pharmacy reported cost of goods sold as follows: 2016‾2017‾Beginning inventory54,000$64,000Cost of goods purchased847,000‾891,000‾Cost of goods available for sale901,000955,000Ending inventory64,000‾55,000‾Cost of goods sold$837,000‾$900,000‾\begin{array}{lcc}& \underline{2016}& \underline{2017}\\\text {Beginning inventory}&54,000 & \$ 64,000 \\\text {Cost of goods purchased}& \underline{847,000} & \underline{891,000} \\\text {Cost of goods available for sale}&901,000 & 955, 000 \\\text {Ending inventory}& \underline{ 64,000} & \underline{55,000 }\\\text {Cost of goods sold}& \underline{ \$ 837,000} & \underline{ \$ 900,000}\end{array}Beginning inventoryCost of goods purchasedCost of goods available for saleEnding inventoryCost of goods sold201654,000847,000901,00064,000$837,0002017$64,000891,000955,00055,000$900,000
Jim Holt the bookkeeper made two errors:
(1) 2016 ending inventory was overstated by $7000.
(2) 2017 ending inventory was understated by $16000.
Instructions
Assuming the errors had not been corrected indicate the dollar effect that the errors had on the items appearing on the financial statements listed below. Also indicate if the amounts are overstated (O) or understated (U). 11eb1392_1bf1_b3a7_8021_79c4e89749fb
Cost of Goods Sold
The immediate expenses related to manufacturing goods for sale in a business, which encompass both materials and labor costs.
Beginning Inventory
The value of a company's inventory at the start of an accounting period, used to calculate cost of goods sold during the period.
Ending Inventory
The total value of goods available for sale at the end of an accounting period, calculated by adding new purchases to beginning inventory and subtracting cost of goods sold.
- Understand the impact of inventory errors on financial statements and how to correct them.
Verified Answer
2014‾2015‾Beginning inventory54,000$57,000Cost of goods purchased847,000‾891,000‾Cost of goods available for sale901,000948,000Ending inventory57,000‾71,000‾Cost of goods sold$844,000‾$877,000‾\begin{array}{lcc}& \underline{2014}& \underline{2015}\\\text {Beginning inventory}&54,000 & \$57,000 \\\text {Cost of goods purchased}& \underline{847,000} & \underline{891,000} \\\text {Cost of goods available for sale}&901,000 & 948, 000 \\\text {Ending inventory}& \underline{ 57,000} & \underline{71,000 }\\\text {Cost of goods sold}& \underline{ \$ 844,000} & \underline{ \$877,000}\end{array}Beginning inventoryCost of goods purchasedCost of goods available for saleEnding inventoryCost of goods sold201454,000847,000901,00057,000$844,0002015$57,000891,000948,00071,000$877,000
Learning Objectives
- Understand the impact of inventory errors on financial statements and how to correct them.
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