P$19-19.$ Recording retrospective adjustments$-$inventories $($Medium $-10$ minutes$)$

In early $2023,$ Darwin's Pet Shop discovered that some of its inventory of dogs

was not what the supplier purported it 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 $31,2022,$

$210$ 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 writedown of puppy inventory on

December $31,2022.$ 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?$)$:

i$.$ Inventory, December $31,2022$

ii$.$ Cost of goods sold, year $2022$

iii. Cost of goods sold, year $2023$