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

Under the periodic inventory system, how is the cost of goods sold (COGS) determined at the end of the accounting period?

By adding ending inventory to purchases

By recording COGS each time a sale is made

By using the lower of cost or market method

By subtracting ending inventory from the sum of beginning inventory and purchases

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Verified step by step guidance

Step 1: Understand the periodic inventory system. Under this system, inventory records are updated at the end of the accounting period rather than continuously. This means that the cost of goods sold (COGS) is calculated after the period ends.

Step 2: Recall the formula for COGS under the periodic inventory system: \( \text{COGS} = \text{Beginning Inventory} + \text{Purchases} - \text{Ending Inventory} \). This formula accounts for the inventory available for sale during the period and subtracts the inventory still on hand at the end.

Step 3: Identify the components of the formula: \( \text{Beginning Inventory} \) is the inventory at the start of the period, \( \text{Purchases} \) are the goods bought during the period, and \( \text{Ending Inventory} \) is the inventory remaining at the end of the period.

Step 4: Add \( \text{Beginning Inventory} \) and \( \text{Purchases} \) to determine the total goods available for sale during the period.

Step 5: Subtract \( \text{Ending Inventory} \) from the total goods available for sale to calculate the cost of goods sold (COGS). This represents the cost of the inventory that was sold during the period.