Question

Bonita Enterprises reported cost of goods sold for 2020 of $1,419,800 and retained earnings of $5,569,300 at December 31, 2020. Bonita later discovered that its ending inventories at December 31, 2019 and 2020, were overstated by $99,040 and $31,710, respectively. Determine the corrected amounts for 2020 cost of goods sold and December 31, 2020, retained earnings.

Answer 1

Answer:cost of goods sold in 2020 = $1,352,470

retained earnings in December 31, 2020 =$5,537,590

Explanation:

For cost of goods sold in 2020

Corrected cost of goods sold =  Reported cost of goods sold in 2020 - overstated value of ending inventory in year 2019 + overstated value of ending inventory in year 2020

=  $1,419,800 -$99,040+  $31,710,

= $1,352,470    

For retained earnings in December 31, 2020

Corrected retained earnings == Reported retained earning in 2020 -  overstated value of ending inventory in year 2020

= $5,569,300-$31,710

=$5,537,590