In early 2019, Darwin’s Pet Shop discovered that some of its inventory of dogs were not what the supplier purported them to be. More than 300 puppies that were supposed to be purebred (and therefore expensive) were in fact sired by parents with unknown history. As at the fiscal year ended December 31, 2018, 210 of these puppies had been sold while 90 remained in inventory. Purebred puppies cost $150 each and they would retail for $400. Non-purebreds have a replacement cost of $40 each, and the estimated sale price is $100 each. Darwin is pursuing the supplier to obtain a refund for the cost difference. However, whether there will be compensation is uncertain.

Required:
a. Record the journal entry for the write down of puppy inventory on December 31, 2018. Note any assumptions necessary.
b. Suppose the error (non-purebreds treated as purebreds) had not been discovered. Indicate the effect of this error on the following accounts (i.e., were they over or understated, and by how much?):

• Inventory, December 31, 2018
• Cost of goods sold, year 2018
• Cost of goods sold, year 2019.