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

In both perpetual and periodic inventory systems, what does the sum of beginning inventory and net purchases represent?

Cost of Goods Available for Sale

Cost of Goods Sold

Net Income

Ending Inventory

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Verified step by step guidance

Understand the concept of 'Cost of Goods Available for Sale': This term represents the total inventory available for sale during a specific period. It is calculated by adding the beginning inventory (inventory carried over from the previous period) to net purchases (purchases made during the current period minus purchase returns, allowances, and discounts).

Recognize the formula for 'Cost of Goods Available for Sale': \( \text{Cost of Goods Available for Sale} = \text{Beginning Inventory} + \text{Net Purchases} \). This formula is applicable in both perpetual and periodic inventory systems.

Differentiate between the options provided: 'Cost of Goods Available for Sale' is not the same as 'Cost of Goods Sold,' 'Net Income,' or 'Ending Inventory.' Each term has a distinct meaning in financial accounting. For example, 'Cost of Goods Sold' is derived by subtracting ending inventory from 'Cost of Goods Available for Sale.'

Apply the concept to the problem: The sum of beginning inventory and net purchases directly represents 'Cost of Goods Available for Sale,' as it accounts for all inventory available for sale during the period.

Verify the understanding: Ensure that the student can distinguish 'Cost of Goods Available for Sale' from other terms like 'Cost of Goods Sold,' 'Net Income,' and 'Ending Inventory,' and understand its role in inventory management and financial reporting.