Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

4. Merchandising Operations

Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory

Financial Accounting

4. Merchandising Operations

Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory

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Multiple Choice

Under the periodic inventory system, how is the weighted average cost per unit calculated to determine the cost assigned to ending inventory and cost of goods sold?

By dividing the total cost of goods available for sale by the total number of units available for sale during the period.

By assigning the specific cost of each item to ending inventory and cost of goods sold.

By averaging the cost of inventory on hand after each purchase throughout the period.

By using the cost of the most recent purchases for ending inventory and the oldest costs for cost of goods sold.

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Verified step by step guidance

Understand the periodic inventory system: In this system, inventory updates are made at the end of the accounting period rather than continuously. This means that the weighted average cost per unit is calculated based on all purchases and inventory available during the period.

Identify the formula for weighted average cost per unit: The weighted average cost per unit is calculated as \( \text{Weighted Average Cost per Unit} = \frac{\text{Total Cost of Goods Available for Sale}}{\text{Total Number of Units Available for Sale}} \).

Determine the 'Total Cost of Goods Available for Sale': This includes the cost of beginning inventory plus the cost of all purchases made during the period.

Determine the 'Total Number of Units Available for Sale': This includes the number of units in beginning inventory plus the number of units purchased during the period.

Divide the 'Total Cost of Goods Available for Sale' by the 'Total Number of Units Available for Sale' to calculate the weighted average cost per unit. This value is then used to assign costs to ending inventory and cost of goods sold.