Question

The cost of goods sold is calculated as follows:

A. Beginning Merchandise Inventory plus Net Delivered Cost of Purchases less Ending Merchandise Inventory equals Cost of Goods Sold.
B. Total Merchandise Available for Sale less Ending Merchandise Inventory.
C. Both A and B.
D. Neither A or B.

Answer 1

Answer:

The answer is C. Both A and B.

Explanation:

Cost of goods sold (COGS) refers to the direct costs of producing the goods sold by a company. This amount includes the cost of the materials and labor directly used to create the good.

The cost of goods sold can be calculated as

Opening stock + Net purchases - Closing stock  

Or

Cost of goods available for sales - closing stock

Which translate to option A and B above.  

Answer 2

Answer:

C. Both A and B.

Explanation:

The movement in the inventory account between the start of a period and the end of that period is as a result of sales and purchases.

Mathematically,

Opening Inventory + Purchases - cost of goods sold = Closing Inventory

As such,

Cost of goods sold

= Opening Inventory + Purchases - Closing Inventory

The sum of the opening inventory and the purchases gives the total inventory available for sale.