Question

In a periodic inventory system, the formula used in computing the cost of goods sold may be summarized as follows:

Select one:

A.

Beginning inventory + purchases - net sales.

B.

Balance in the Cost of Goods Sold account, less the balance in the Inventory Shrinkage account.

C.

Beginning inventory + purchases - ending inventory.

D.

Ending inventory + purchases - net sales.

Answer 1

Option C

Beginning inventory + purchases - ending inventory

In a periodic inventory system, the amount of inventory is determined at the end of specific period. The physical count or actual account of inventory is taken at the end of specific period to determine the value of inventory. The cost of goods sold is determined by using the end-of-period computation.

Thus,

Cost of goods sold = Beginning inventory + purchases - ending inventory