In its 2019 income statement, Riley Company reported cost of goods sold of $85,000. Later, Riley determined that beginning inventory was understated by $23,000, and the ending inventory was understated by $10,000.
What should be the corrected amount for cost of goods sold for 2019?

Question

Quizplus · Accepted Answer

The cost of goods sold (COGS) is calculated as: Beginning Inventory + Purchases - Ending Inventory. If the beginning inventory was understated by $23,000, it means the COGS was understated by $23,000. If the ending inventory was understated by $10,000, it means the COGS was overstated by $10,000. Therefore, the corrected COGS is $85,000 + $23,000 - $10,000 = $98,000.

In Its 2019 Income Statement, Riley Company Reported Cost of Goods