You recorded $20 worth of paper cups and lemons under inventories. These inventories were fully used up during the year (recall that the company also recorded $20 in COGS during the year), so inventories decreased by $20 to $0. Retained earnings were therefore reduced by $20.
Debits | Credits | |
---|---|---|
COGS (SE): | $20 | |
Inventories (A): | $20 |