Multiple Choice
In a perpetual inventory system, the cost of inventory sold is:
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4. Merchandising Operations
Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory
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Which of the following is NOT a component in determining Cost of Goods Sold (COGS) under the periodic inventory system?
A
Beginning inventory
B
Inventory purchases recorded at the time of each sale
C
Ending inventory
D
Purchases during the period
Verified step by step guidance1
Understand the periodic inventory system: In this system, the Cost of Goods Sold (COGS) is calculated at the end of the accounting period, rather than recording inventory changes continuously. This requires specific components to determine COGS.
Identify the formula for COGS under the periodic inventory system: The formula is: \( \text{COGS} = \text{Beginning Inventory} + \text{Purchases During the Period} - \text{Ending Inventory} \).
Analyze the components listed in the problem: Beginning inventory, purchases during the period, and ending inventory are all part of the formula for calculating COGS under the periodic inventory system.
Evaluate the option 'Inventory purchases recorded at the time of each sale': This is not a component of the periodic inventory system. Instead, it is a characteristic of the perpetual inventory system, where inventory changes are recorded continuously.
Conclude that the correct answer is 'Inventory purchases recorded at the time of each sale,' as it does not belong to the periodic inventory system's method of calculating COGS.
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