Reference no: EM132597786

Pete's Packaging reported its cost of goods sold as follows:

                                                2014                             2013

Beginning inventory          $ 26,000                     $19,000

Cost of goods purchased       195,000                 168,000

Ending inventory                  (34,500)                 (26,000)

Cost of goods sold               $ 186,500             $161,000

The ending inventory at September 30, 2013 was overstated by $6,500.

Instructions

Question a. Calculate the correct cost of goods sold for both years.

Question b. Describe how the error has affected the financial statements for 2013 and for 2014, and for the two years combined.