Prunedale Co. uses a periodic inventory system. Beginning inventory on January 1 was overstated by $32,000, and its ending inventory on December 31 was understated by $62,000. These errors were not discovered until the following year. As a result, Prunedale's cost of goods sold for this year was:
A)Overstated by $94,000.
B)Overstated by $30,000.
C)Understated by $94,000.
D)Understated by $30,000.Overstatement of beginning inventory overstates cost of goods sold and the understatement of ending inventory overstates cost of goods sold: $32,000 + 62,000 = $94,000 overstatement of cost of goods sold

Question

Quizplus · Accepted Answer

The overstatement of beginning inventory and the understatement of ending inventory both lead to an overstatement of cost of goods sold by $94,000 ($32,000 + $62,000).