For calendar 2020, Redfern Corporation reported pre-tax income of $270,000. You have been made aware that the company's beginning inventory was overstated by $14,000 and ending inventory was understated by $9,000. What is Redfern's corrected pre-tax income for 2020?

Question

Quizplus · Accepted Answer

The beginning inventory overstatement of $14,000 would have caused the cost of goods sold to be understated, increasing income by $14,000. The ending inventory understatement of $9,000 would have caused the cost of goods sold to be overstated, decreasing income by $9,000. Therefore, the corrected pre-tax income is $270,000 + $14,000 - $9,000 = $275,000.

For Calendar 2020, Redfern Corporation Reported Pre-Tax Income of $270,000