Charles Scrab Inc. has beginning inventory of $15,000, purchases of $25,000, and ending inventory of $10,000, sales of $75,000, operating expenses of $30,000, and a tax rate of 40% for 2008. An accounting clerk input the ending inventory as $12,000. What is the effect on 2008 cost of goods sold?

Question

Quizplus · Accepted Answer

The correct ending inventory is $10,000, not $12,000. Therefore, the cost of goods sold is overstated by the amount of the difference ($12,000 - $10,000 = $2,000). So, the actual cost of goods sold is $2,000 lower than what was reported by the accounting clerk. Therefore, the correct answer is (D) Cost of Goods Sold will be $2,000 lower.