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, cost of goods sold (COGS) is computed using which of the following equations?

COGS = Beginning Inventory + Purchases - Ending Inventory

COGS = Beginning Inventory - Purchases + Ending Inventory

COGS = Purchases - Beginning Inventory + Ending Inventory

COGS = Ending Inventory + Purchases - Beginning Inventory

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Verified step by step guidance

Step 1: Understand the periodic inventory system. Under this system, inventory is updated at the end of the accounting period, and the cost of goods sold (COGS) is calculated based on the changes in inventory and purchases during the period.

Step 2: Recall the formula for COGS under the periodic inventory system. The correct formula is: \( \text{COGS} = \text{Beginning Inventory} + \text{Purchases} - \text{Ending Inventory} \). This formula accounts for the inventory available for sale during the period and subtracts the ending inventory to determine the goods sold.

Step 3: Analyze the components of the formula: \( \text{Beginning Inventory} \) represents 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: Compare the given options to the correct formula. The correct option matches \( \text{COGS} = \text{Beginning Inventory} + \text{Purchases} - \text{Ending Inventory} \). Other options do not align with the logic of the periodic inventory system.

Step 5: Apply this formula in practice by substituting the values for beginning inventory, purchases, and ending inventory to compute the cost of goods sold for a given period.