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

Which of the following statements best describes how the cost of goods sold (COGS) for Product B is determined under the perpetual inventory system compared to the periodic inventory system?

Under both systems, COGS is only calculated at the end of the accounting period.

COGS is always the same under both systems, regardless of inventory transactions.

Under the perpetual system, COGS is updated continuously with each sale, while under the periodic system, COGS is calculated at the end of the period.

The perpetual system does not track COGS, while the periodic system updates COGS with each sale.

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Verified step by step guidance

Step 1: Understand the concept of the perpetual inventory system. In this system, inventory records are updated continuously to reflect inventory purchases and sales. The cost of goods sold (COGS) is calculated and recorded immediately after each sale transaction.

Step 2: Understand the concept of the periodic inventory system. In this system, inventory records are not updated continuously. Instead, the COGS is calculated at the end of the accounting period by using the formula: \( \text{COGS} = \text{Beginning Inventory} + \text{Purchases} - \text{Ending Inventory} \).

Step 3: Compare the timing of COGS calculation in both systems. Under the perpetual system, COGS is updated in real-time with each sale, while under the periodic system, COGS is determined only at the end of the accounting period.

Step 4: Analyze the statement options provided in the problem. Eliminate incorrect options based on the definitions and timing of COGS calculation in both systems.

Step 5: Identify the correct answer: 'Under the perpetual system, COGS is updated continuously with each sale, while under the periodic system, COGS is calculated at the end of the period.' This aligns with the operational differences between the two systems.