Chapter 6, Problem S6.9SE

Determining the effect of an inventory error

Learning Objective 5

New York Pool Supplies’s merchandise inventory data for the year ended Decenter 31, 2019, follow:

Net Sales Revenue		$58,000
Cost of Goods Sold:
Beginning Merchandise Inventory	$4,900
Net Cost of Purchases	32,500
Cost of Goods Available for Sale	37,400
Less: Ending Merchandise Inventory	4,700
Cost of Goods Sold		32, 700
Gross Profit		$25,300

Requirements

1. Assume that the ending merchandise inventory was accidently overstated by $1,800. What are the correct amounts for cost of goods sold and gross profit?
2. How would the inventory error affect New York Pool Supplies’s cost of goods sold and gross profit for the year ended December 31, 2020, if the error is not corrected in 2019?