For calendar 2020, Gomez Corporation reported pre-tax income of $70,000. A recount of the company's inventory revealed that 2020 ending inventory was overstated by $10,000. What is Gomez's corrected pre-tax income for 2020?

Question

Quizplus · Accepted Answer

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

For Calendar 2020, Gomez Corporation Reported Pre-Tax Income of $70,000