Multiple Choice
Under a periodic inventory system, purchases are:
4. Merchandising Operations
Periodic Inventory - Purchases
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In the periodic inventory method, which of the following is calculated only at the end of the accounting period?
A
Inventory Purchases Returns
B
Purchases
C
Cost of Goods Sold (COGS)
D
Sales Revenue
Verified step by step guidance1
Understand the periodic inventory method: In this method, inventory is not updated continuously. Instead, inventory and cost of goods sold (COGS) are determined at the end of the accounting period.
Recognize the key components involved: Purchases, purchase returns, and sales revenue are recorded during the accounting period, but the calculation of COGS is deferred until the end.
Recall the formula for COGS under the periodic inventory method: \( \text{COGS} = \text{Beginning Inventory} + \text{Purchases} - \text{Purchase Returns} - \text{Ending Inventory} \).
At the end of the accounting period, gather the necessary data: Determine the beginning inventory, total purchases, purchase returns, and ending inventory values.
Perform the calculation using the formula: Substitute the gathered values into the COGS formula to compute the cost of goods sold for the period.
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