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

During the year, TRC Corporation has the following inventory transactions: purchases of 1,000 units, sales of 800 units, and a beginning inventory of 200 units. Under the perpetual inventory system, how is the Cost of Goods Sold (COGS) determined?

COGS is updated continuously after each sale, reflecting the cost of the specific inventory sold.

COGS is determined by averaging the cost of all inventory purchases during the year.

COGS is not affected by the timing of inventory purchases or sales.

COGS is calculated only at the end of the period based on a physical count of inventory.

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Verified step by step guidance

Step 1: Understand the perpetual inventory system. In this system, inventory records are updated continuously after each transaction, including purchases and sales. This means that the Cost of Goods Sold (COGS) is updated immediately after each sale.

Step 2: Identify the inventory transactions provided in the problem. TRC Corporation has a beginning inventory of 200 units, purchases of 1,000 units, and sales of 800 units during the year.

Step 3: Recognize that under the perpetual inventory system, the COGS is calculated based on the cost of the specific inventory sold. This requires tracking the cost of each unit sold and updating the COGS after every sale.

Step 4: Note that the perpetual inventory system does not rely on averaging the cost of all inventory purchases or performing a physical count at the end of the period. Instead, it continuously reflects the cost of inventory sold in real-time.

Step 5: To determine the COGS, you would need to know the cost assigned to each unit sold (e.g., using methods like FIFO, LIFO, or specific identification) and update the COGS after each sale transaction.