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 equations correctly identifies the cost flow of a merchandising company under the periodic inventory system?

Cost of Goods Sold = Ending Inventory + Purchases - Beginning Inventory

Cost of Goods Sold = Purchases - Beginning Inventory + Ending Inventory

Cost of Goods Sold = Beginning Inventory - Purchases + Ending Inventory

Cost of Goods Sold = Beginning Inventory + Purchases - Ending Inventory

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Verified step by step guidance

Understand the periodic inventory system: In this system, inventory is updated at the end of the accounting period, and the cost of goods sold (COGS) is calculated using the formula that accounts for the beginning inventory, purchases, and ending inventory.

Recall the formula for calculating COGS under the periodic inventory system: COGS = Beginning Inventory + Purchases - Ending Inventory. This formula reflects the flow of inventory costs during the period.

Break down the formula: Beginning Inventory represents the value of inventory at the start of the period. Purchases represent the cost of goods acquired during the period. Ending Inventory represents the value of inventory remaining at the end of the period.

Analyze the options provided: Compare each equation to the correct formula. The correct equation is the one that matches the structure of COGS = Beginning Inventory + Purchases - Ending Inventory.

Verify the logic: The formula ensures that the cost of goods sold accounts for the inventory used during the period (Beginning Inventory + Purchases) minus the inventory still on hand (Ending Inventory). This aligns with the principles of the periodic inventory system.