Multiple Choice
Under both the perpetual and periodic inventory systems, when does the cost of inventory become an expense (Cost of Goods Sold) on the income statement?
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4. Merchandising Operations
Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory
Multiple Choice
Sweeten Company uses a perpetual inventory system. At the beginning of the year, inventory was \$10,000. During the year, purchases amounted to \$50,000, and sales totaled \$80,000. At year-end, a physical count showed ending inventory of \$8,000. What is Sweeten Company's cost of goods sold for the year?
A
\$58,000
B
\$60,000
C
\$52,000
D
\$48,000
Verified step by step guidance1
Step 1: Understand the formula for calculating Cost of Goods Sold (COGS) in a perpetual inventory system. The formula is: COGS = Beginning Inventory + Purchases - Ending Inventory.
Step 2: Identify the values provided in the problem. Beginning Inventory = \$10,000, Purchases = \$50,000, Ending Inventory = \$8,000.
Step 3: Substitute the values into the formula. Using MathML, the formula becomes: .
Step 4: Perform the addition and subtraction operations step by step. First, add Beginning Inventory and Purchases, then subtract Ending Inventory from the result.
Step 5: Verify the calculation by ensuring all values are correctly substituted and operations are performed in the correct order. This will give you the Cost of Goods Sold for the year.
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