Which of the following formulas represents cost of goods sold for a merchandising business?
A) Beginning Merchandise Inventory - Ending Merchandise Inventory = Cost of Goods Sold
B) Purchases and Freight In - Ending Merchandise Inventory = Cost of Goods Sold
C) Ending Merchandise Inventory + Purchases and Freight In - Beginning Merchandise Inventory = Cost of Goods Sold
D) Beginning Merchandise Inventory + Purchases and Freight In - Ending Merchandise Inventory = Cost of Goods Sold

Question

Quizplus · Accepted Answer

The formula for cost of goods sold for a merchandising business is Beginning Merchandise Inventory + Purchases and Freight In - Ending Merchandise Inventory. This is because cost of goods sold represents the cost of the products that were sold during the period, which includes the cost of beginning inventory plus any additional inventory purchased during the period, minus the ending inventory still on hand. Choice A is incorrect because it only takes into account the change in inventory levels without considering purchases. Choice B is incorrect because it only subtracts the ending inventory, without factoring in the beginning inventory or purchases. Choice C is incorrect because it adds both the beginning and ending inventory to purchases, resulting in an inflated cost of goods sold.

Which of the Following Formulas Represents Cost of Goods Sold