Prunedale Co. uses a periodic inventory system. Beginning inventory on January 1 was overstated by $32,000, and its ending inventory on December 31 was understated by $62,000. These errors were not discovered until the next year. As a result, Prunedale's cost of goods sold for this year was:
A) Overstated by $94,000.
B) Overstated by $30,000.
C) Understated by $94,000.
D) Understated by $30,000.

Question

Quizplus · Accepted Answer

Overstatement of beginning inventory overstates cost of goods sold and the understatement of ending inventory overstates cost of goods sold:
$32,000 + 62,000 = $94,000 overstatement of cost of goods sold