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

If all units are purchased at the same unit cost, how will the Cost of Goods Sold (COGS) calculated under the perpetual inventory system compare to the COGS calculated under the periodic inventory system?

COGS will be higher under the periodic system.

COGS will be higher under the perpetual system.

COGS will be the same under both systems.

COGS cannot be determined without additional information.

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Verified step by step guidance

Understand the difference between the perpetual and periodic inventory systems. The perpetual system updates inventory and Cost of Goods Sold (COGS) continuously after each transaction, while the periodic system updates inventory and calculates COGS at the end of the accounting period.

Recognize that the unit cost of inventory is the same for all units purchased, which simplifies the calculation of COGS under both systems.

In the perpetual system, COGS is calculated by tracking each sale and applying the unit cost to the quantity sold immediately after the transaction.

In the periodic system, COGS is calculated at the end of the period using the formula: \( \text{COGS} = \text{Beginning Inventory} + \text{Purchases} - \text{Ending Inventory} \). Since the unit cost is consistent, the calculation will yield the same result as the perpetual system.

Conclude that when all units are purchased at the same unit cost, the COGS calculated under the perpetual inventory system will be the same as the COGS calculated under the periodic inventory system.