[eddie11]

Company A reported cost of good sold for 2007 of 1,000,000 and retained earnings of
5,000,000 at December 31, 2007. The company later discovered that its ending inventories at December 31, 2006 and 2007 were overstated by 100,000 and 50,000 respectively. Determine the corrected amounts for 2007 cost of goods sold and December 31, 2007, retained earnings

[CaptainForest]

What do YOU think the answers are?

[eddie11]

COGS : $ 1,000,000+ $50,000 = $1,050,000

Retained Earnings : $ 5,000,000 - $50,000 = $4,950,000

??

I am not sure of what impact ,if any,( given the $50,000 inventory overstatement error for2007) the $100,000 inventory overstatement for 2006 would have on COGS and retained earnings for 2007.

[CaptainForest]

2007 COGS overstated by 50,000
R/E account was overstated 100,000 after 2006 and understated by 50,000 in 2007 so a net of overstatement by 50,000