Multiple Choice
Manufacturing costs include which of the following?
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4. Merchandising Operations
Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory
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In a periodic inventory system, beginning inventory plus net purchases equals which of the following?
A
Gross profit
B
Cost of goods sold
C
Ending inventory
D
Cost of goods available for sale
Verified step by step guidance1
Understand the components involved in inventory accounting under a periodic inventory system: Beginning Inventory, Net Purchases, Cost of Goods Sold (COGS), and Ending Inventory.
Recall the formula for Cost of Goods Available for Sale, which represents the total inventory available to be sold during the period. This is calculated as: \(\text{Cost of Goods Available for Sale} = \text{Beginning Inventory} + \text{Net Purchases}\).
Recognize that Gross Profit is calculated as Sales Revenue minus Cost of Goods Sold, so it is not directly equal to Beginning Inventory plus Net Purchases.
Know that Cost of Goods Sold is derived from Cost of Goods Available for Sale minus Ending Inventory, so it cannot be equal to Beginning Inventory plus Net Purchases alone.
Conclude that Beginning Inventory plus Net Purchases equals Cost of Goods Available for Sale, which is the total inventory ready for sale before subtracting Ending Inventory.
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