Financial and Managerial Accounting Study Set 2
Adding Together the Ending Merchandise Inventory and Cost of Goods
Adding together the ending merchandise inventory and cost of goods sold gives the amount of goods available for sale.
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A large discount chain,like Wal-Mart or Target,most likely would use the periodic inventory system to maintain control of its inventory.
A retail operation would not have to take a physical inventory if it uses a perpetual inventory system.
Under the periodic inventory system,Cost of goods sold must be computed on the income statement because it is not updated for purchases,sales,and other transactions during the accounting period.
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