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E7.6 Designer Shoe Warehouse reported the following items in its fiscal 2019 financial report (dollars in millions): 2019 2018 Sales $3,184 $2,811 Cost of goods
E7.6 Designer Shoe Warehouse reported the following items in its fiscal 2019 financial report (dollars in millions):
2019 | 2018 | |||
Sales | $3,184 | $2,811 | ||
Cost of goods sold: | ||||
Beginning inventory | $502 | $500 | ||
Purchases | 2,382 | 2,008 | ||
Goods available for sale | $2,884 | $2,508 | ||
Less: Ending inventory | 645 | 502 | ||
Cost of goods sold | 2,239 | 2,006 | ||
Gross profit | $945 | $805 |
Assume that counting errors caused the ending inventory in 2018 to be understated by $50 and the ending inventory in 2019 to be overstated by $50.
- Compute the impact of these errors on cost of goods sold for the year ended December 31, 2018, and on the inventory balance as of December 31, 2018.
- Compute the impact of these errors on cost of goods sold for the year ended December 31, 2019, and on the inventory balance as of December 31, 2019.
- What is the impact of these errors on cost of goods sold over the two-year period ended December 31, 2019?
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