For calendar 2014, Gomez Corporation reported pre-tax income of $70,000.A recount of the company's inventory revealed that 2014 ending inventory was overstated by $10,000.What is Gomez's corrected pre-tax income for 2014?

Question

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The overstatement of ending inventory by $10,000 means that the cost of goods sold was understated by $10,000. Correcting this would increase the cost of goods sold by $10,000, thus reducing the pre-tax income by $10,000 from $70,000 to $60,000.

For Calendar 2014, Gomez Corporation Reported Pre-Tax Income of $70,000