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Which of the following statements best describes how the cost of goods sold (COGS) for Product B is determined under the perpetual inventory system compared to the periodic inventory system?
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4. Merchandising Operations
Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory
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Given the following information for a company using the periodic inventory system: \(\begin{align*}\) \(\text{Beginning Inventory}\) &= \$10,000 \\ \(\text{Purchases}\) &= \$25,000 \\ \(\text{Ending Inventory}\) &= \$8,000 \(\end{align*}\) What is the Cost of Goods Sold (COGS)?
A
\$33,000
B
\$35,000
C
\$23,000
D
\$27,000
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Step 1: Understand the formula for Cost of Goods Sold (COGS) under the periodic inventory system. The formula is: \( \text{COGS} = \text{Beginning Inventory} + \text{Purchases} - \text{Ending Inventory} \).
Step 2: Identify the values provided in the problem: \( \text{Beginning Inventory} = \$10,000 \), \( \text{Purchases} = \$25,000 \), and \( \text{Ending Inventory} = \$8,000 \).
Step 3: Substitute the values into the formula: \( \text{COGS} = \$10,000 + \$25,000 - \$8,000 \).
Step 4: Perform the addition first: \( \$10,000 + \$25,000 \).
Step 5: Subtract \( \$8,000 \) from the result of the addition to calculate the Cost of Goods Sold.
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