Under both the perpetual and periodic inventory systems, how is the cost of goods available for sale calculated?

• A. Purchases during the period minus beginning inventory
• B. Cost of goods sold plus ending inventory
• C. Ending inventory plus purchases during the period
• D. Beginning inventory plus purchases during the period

Answer: (D)

Verified step by step guidance

1. Step 1: Understand the concept of 'Cost of Goods Available for Sale'. It represents the total inventory available for sale during a specific period, combining the inventory at the start of the period and any purchases made during the period.
2. Step 2: Recall the formula for calculating 'Cost of Goods Available for Sale'. It is: Beginning Inventory + Purchases During the Period.
3. Step 3: Analyze why this formula works. Beginning inventory represents the stock carried over from the previous period, and purchases during the period add to this stock, giving the total inventory available for sale.
4. Step 4: Note that this calculation is consistent under both perpetual and periodic inventory systems. The method of tracking inventory does not change the formula for 'Cost of Goods Available for Sale'.
5. Step 5: Apply the formula to any given data. Identify the beginning inventory and purchases during the period, then add them together to determine the cost of goods available for sale.