When Using a Periodic Inventory System, Which Statement Concerning the Computation

question 65

Multiple Choice

When using a periodic inventory system, which statement concerning the computation of cost of goods sold is correct?

• A)The amount of ending inventory is determined on the last day of the accounting period.
• B)Cost of goods available for sale includes net purchases plus the ending inventory.
• C)Purchases represent cash paid for purchases during the accounting period.
• D)Freight-in is ignored.

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Definitions:

FIFO Method

An inventory valuation method where the first items purchased or produced are the first ones to be sold or used, standing for "First In, First Out."

Conversion Costs

The combination of direct labor costs and manufacturing overheads that are incurred in converting raw materials into finished goods.

Total Costs

The complete sum of all expenses, direct and indirect, incurred in producing a good or delivering a service.

Finished Goods

Finished Goods are products that have completed all stages of production and are ready for sale to customers.