Question

Sheridan Enterprises reported cost of goods sold for 2020 of $1,322,900 and retained earnings of $4,854,000 at December 31, 2020. Sheridan later discovered that its ending inventories at December 31, 2019 and 2020, were overstated by $106,470 and $36,820, respectively. Determine the corrected amounts for 2020 cost of goods sold and December 31, 2020, retained earnings. Corrected cost of goods sold $enter a dollar amount Corrected 12/31/20 retained earnings $enter a dollar amount

Answer 1

See below

Step-by-step explanation:

With regard to the above information,

1. Corrected cost of goods sold is computed as

= Cost of goods sold + Overstated ending inventories 2019 - overstated ending inventories 2020

= $1,322,900 + $106,470 - $36,820

= $1,253,250

2. Corrected 12/31/2020 retained earnings is computed as

= Retained earnings DEC 2020 - overstated ending inventories 2020

= $4,854,000 - $36,820

= $4,817,180