Ramiro Co Has Valued Its Beginning and Ending Inventories at $4,000

question 65

Essay

Ramiro Co. has valued its beginning and ending inventories at $4,000 and $5,000, respectively, during a period where purchases totaled $150,000. An auditor found errors in the ending inventory valuation and insisted that it be restated to $6,000. Calculate the adjusted cost of goods sold resulting from the inventory restatement.

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Definitions:

Speculative Forward Contract

A financial derivative used to speculate on the future price of an asset, involving an agreement to buy or sell the asset at a future date for a price determined today.

Fair Value Hedge

A risk management technique that uses financial instruments to mitigate the risk associated with changes in the fair value of an asset or liability.

Firm Commitment

An agreement between a buyer and an underwriter in which the underwriter guarantees the sale of a certain amount of securities.

Cash Flow Hedge

A hedging strategy used to manage risk associated with variability in cash flows, typically related to interest rates or currency exchange rates.