In a Periodic Inventory System, the Cost of Purchases Is

question 151

Multiple Choice

In a periodic inventory system, the cost of purchases is recognized as

• A)an integral part of the calculation of cost of goods sold.
• B)the only part of the calculation of cost of goods sold.
• C)an increase in the inventory account.
• D)an increase in an asset account.

---

Definitions:

Average cost method

An inventory costing method where all costs of inventory are averaged out to determine the cost of goods sold and the ending inventory value.

Cost of merchandise sold

The entire expense directly tied to the production and sale of products in inventory that were sold during a specific period.

Year amount

An expression referring to the total amount or figures calculated over a year's period.

Average cost method

An inventory costing method where the cost of goods sold and ending inventory is calculated based on the average cost of all units available for sale during the period.