Answer:
COGS = $816000
RE = $1542000
explanation:
Getting Corrected Cost of Goods Sold,(COGS.)
equals the sum and substract of inventory, purchases and ending inventory:
COGS = BeginningInventory + Purchases - EndingInventory
COGS = BI + P - EI
The BI given is $840,000. purchases is not available
The EI equals difference between $39000 and $63000
63000 - 39000= $24000
corrected amounts of COGS is
COGS = 840000- 24000 = $816000
the retained earnings can be calculated by
substraction of the value of the retained earning from ending inventory by the end of 2017,
$63000,
RE = 1605000 - 63000 = $1542000
Answer:
Cost of Goods sold = $864000
retained earnings = $1581000
Explanation:
The cost of goods sold is the dollar cost of the inventory that is sold during the period. It is calculated as follows:
Cost of Goods sold = Opening Inventory + Purchases - Closing Inventory
The overstatement of opening inventory causes the cost of goods sold to rise or be overstated as the opening inventory is added when we are calculating the cost of goods sold. An overstatement of cost of goods sold reduces the Net Income and thus reduces the retained earnings which is made up of the Net Income retained in the business.
The overstatement of closing inventory reduces the cost of goods sold or causes it to be understated as it is subtracted when calculating the cost of goods sold. An understatement of cost of goods sold causes the Net Income to be overstated and thus increases the retained earnings.
31 December 2017
Corrected cost of goods sold = 840000 - 39000 + 63000 = $864000
The cost of goods sold were understated by = 864000 - 840000 = $24000
Corrected Retained earnings = $1605000 - 24000 = $1581000
