Marigold’s Hardware reported cost of goods sold as follows. 2018 2019 $ 23,500 $

Question

Marigold’s Hardware reported cost of goods sold as follows.

2018

2019

$ 23,500

$ 30,500

154,500

185,500

178,000

216,000

30,500

38,500

$147,500

$177,500

Marigold’s made two errors: (1) 2018 ending inventory was overstated $3,400, and (2) 2019 ending inventory was understated $6,300.

Compute the correct cost of goods sold for each year.

2018

2019

Beginning inventory

$ 23,500

$ 30,500

Cost of goods purchased

154,500

185,500

Cost of goods available for sale

178,000

216,000

Ending inventory

30,500

38,500

Cost of goods sold

$147,500

$177,500

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Explanation / Answer

Answer:

Year 2018:

Corrected Ending Inventory = $30,500 - $3,400
Corrected Ending Inventory = $27,100

Correct Cost of Goods Sold = Beginning Inventory + Cost of Goods purchased – Corrected Ending Inventory
Correct Cost of Goods Sold = $23,500 + $154,500 - $27,100
Correct Cost of Goods Sold = $205,100

Year 2019:

Corrected Beginning Inventory = $27,100

Corrected Ending Inventory = $38,500 + $6,300
Corrected Ending Inventory = $44,800

Correct Cost of Goods Sold = Corrected Beginning Inventory + Cost of Goods purchased – Corrected Ending Inventory
Correct Cost of Goods Sold = $27,100 + $185,500 - $44,800
Correct Cost of Goods Sold = $167,800

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