Error in Reported Inventory Levels Crown Company reported cost of goods sold of $495,000 and gross profit of $134,000 for 2000; however, the external auditor in performing the audit work discovered the company had incorrectly stated its inventory at January 1, 2000, at $32,000 rather than $48,000, and had incorrectly reported its inventory at December 31, 2000, at $52,000 rather than $41,000.

Crown Company computes its cost of goods as follows:

a. Assuming inventory purchases of $515,000 have been correctly recorded for the year, show the computation of cost of goods sold as reported by Crown Company for 2000. What amount should it have reported as cost of goods sold?

b. What amount should Crown Company have reported as gross profit for 2000?

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Beginning inventory + Purchases = Goods available for sale - Ending inventory = Cost of goods sold