For calendar 2017, Gomez Corporation reported pre-tax income of $70,000.A recount of the company's inventory revealed that 2017 ending inventory was overstated by $10,000.What is Gomez's corrected pre-tax income for 2017?

Question

Quizplus · Accepted Answer

Since the ending inventory was overstated by $10,000, the cost of goods sold was understated by the same amount. This means that the reported pre-tax income of $70,000 was too high by $10,000, leading to a corrected pre-tax income of $60,000 ($70,000 - $10,000). Therefore, the best choice is A.

For Calendar 2017, Gomez Corporation Reported Pre-Tax Income of $70,000