Question

Regardless of whether a business uses FIFO, LIFO, or weighted average cost for its inventory costing system, cost of goods available for sale must be allocated at the end of the period between these two categories. Multiple Choice beginning inventory and cost of goods sold. net purchases during the period and ending inventory. ending inventory and beginning inventory. ending inventory and cost of goods sold.

Answer 1

Answer:

Cost of goods available for sale must be allocated at the end of the period between ending inventory and cost of goods sold.

Explanation:

Cost of goods available for sale can be described as the maximum amount of inventory, stock, or goods that is possible for a firm to sell during an accounting period. It is the maximum amount because it is not possible for a firm to sell more than the cost of goods available for sale.

The cost of goods available for sale is obtained by adding beginning inventory and net purchases during an accounting period. This can be stated as follows:

COGAFS = BI + NP ............................... (1)

Where;

COGAFS = Cost of goods available for sale

BI = Beginning inventory

NP = Net purchases

At the end of an accounting period, ending inventory is deducted from the cost of goods available for sale to obtain cost of goods sold as follows:

COGS = COGAFS - EI ............................ (2)

Where;

COGS = Cost of goods sold

COGAFS = Cost of goods available for sale

EI = Ending inventory

Rearranging equation (2) and solve for COGAFS, we have:

COGFAS = COGS + EI ........................... (3)

Equation (3) therefore implies that the correct option is "cost of goods available for sale must be allocated at the end of the period between ending inventory and cost of goods sold".