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 correctly represents the formula for Cost of Goods Sold (COGS) under the periodic inventory system?

COGS = Purchases - Beginning Inventory + Ending Inventory

COGS = Ending Inventory + Purchases - Beginning Inventory

COGS = Beginning Inventory + Purchases - Ending Inventory

COGS = Beginning Inventory - Purchases + Ending Inventory

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Verified step by step guidance

Understand the concept of Cost of Goods Sold (COGS) under the periodic inventory system. COGS represents the cost of inventory sold during a specific period and is calculated using the formula that accounts for beginning inventory, purchases, and ending inventory.

Recall the formula for COGS under the periodic inventory system: \( \text{COGS} = \text{Beginning Inventory} + \text{Purchases} - \text{Ending Inventory} \). This formula ensures that the cost of goods sold is derived by adding the cost of inventory available for sale and subtracting the inventory that remains unsold at the end of the period.

Analyze the options provided in the problem. Compare each formula to the standard formula for COGS under the periodic inventory system to identify the correct representation.

Option 1: \( \text{COGS} = \text{Purchases} - \text{Beginning Inventory} + \text{Ending Inventory} \). This formula is incorrect because it does not properly account for the relationship between beginning inventory, purchases, and ending inventory.

Option 3: \( \text{COGS} = \text{Beginning Inventory} + \text{Purchases} - \text{Ending Inventory} \). This formula correctly represents the calculation of COGS under the periodic inventory system, as it aligns with the standard formula.