Assuming the periodic inventory method is used on the income statement, the beginning inventory is added to the cost of goods purchased to yield the: Group of answer choices cost of sales. cost of goods available for sale. profit from operations. gross profit.
Question
Assuming the periodic inventory method is used on the income statement, the beginning inventory is added to the cost of goods purchased to yield the: Group of answer choices
cost of sales.
cost of goods available for sale.
profit from operations.
gross profit.
Solution 1
The correct answer is:
"Cost of goods available for sale."
Explanation:
In a periodic inventory system, the cost of goods available for sale is calculated by adding the beginning inventory to the cost of goods purchased during the period. This gives the total cost of all goods that were available to be sold during the period, regardless of whether they were actually sold or not.
Here's the step-by-step calculation:
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Start with the beginning inventory. This is the value of all goods that were in inventory at the start of the period.
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Add the cost of goods purchased. This is the cost of all additional inventory items that were purchased during the period.
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The result is the cost of goods available for sale. This is the total cost of all goods that were available to be sold during the period.
The other options are not correct:
- Cost of sales (or cost of goods sold) is calculated by subtracting the ending inventory from the cost of goods available for sale.
- Profit from operations and gross profit are calculated later in the income statement, after subtracting the cost of goods sold and operating expenses from sales revenue.
Solution 2
Assuming the periodic inventory method is used on the income statement, the beginning inventory is added to the cost of goods purchased to yield the:
Cost of Goods Available for Sale.
Here's why:
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Under the periodic inventory method, the inventory is not updated for each purchase or sale during the accounting period. Instead, the inventory is updated at the end of the period.
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The Cost of Goods Available for Sale is calculated by adding the beginning inventory to the cost of goods purchased during the period. This gives the total cost of all goods that were available to be sold during the period, regardless of whether they were actually sold or not.
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This is different from the Cost of Sales (or Cost of Goods Sold), which is calculated at the end of the period by subtracting the ending inventory from the Cost of Goods Available for Sale.
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The Profit from Operations and Gross Profit are also calculated later in the income statement, after subtracting various expenses from the sales revenue.
Similar Questions
Summarize a periodic inventory system by selecting all of the correct statements below.Multiple select question.The Purchases account is used during the period.The Purchase Discounts account is used during the period.The Purchase Returns and Allowances account is used during the period.When a company records a sale, it also records the cost of the goods sold.The Merchandise Inventory account is updated every time a sale is made.Cost of goods sold is computed at the end of the period.The balance in the Merchandise Inventory account remains the beginning balance until the end of the period.The Merchandise Inventory account is updated only at the end of the period.
Assuming the periodic inventory method is used for the current year, the following data were taken from the accounting records:Sales $900,000Sales returns and allowances $ 30,000Purchases $500,000Purchase returns and allowances $ 8,000Discount received $ 4,000Freight-in $ 2,000Beginning inventory $ 90,000Ending inventory $130,000What was the cost of goods available for sale?Question 1Answera.$584,000b.$620,000c.$530,000d.$580,000Clear my choice
An inventory error not only affects the current year's cost of goods sold, gross profit, net income, current assets and equity, but also the next period's statements becauseMultiple choice question.cost of goods sold of one period is the cost of goods sold in the next period.beginning inventory of one period is the ending inventory of the next period.net purchases in one period is also the net purchases in the next period.ending inventory of one period is the beginning inventory of the next period.
All descriptions reveal the characteristics of a periodic inventory system, EXCEPT:Group of answer choicescost of goods sold is determined at the end of the periodinventory record is always up-to-datemerchandise inventory account is set-up at the beginning and ending of accounting periodpurchases are recorded at costNext
Assuming the periodic inventory method is used for the current period, the following data was taken from the ledger: Purchases $55 000 Purchases Returns and Allowances $950 Discount Received $1 100 Freight-in $800 Beginning inventory was $12 000 and ending inventory was $15 000. What was cost of goods purchased? Group of answer choices $55 000 $54 050 $54 850 $52 950
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