Question

Cost of goods sold is computed from the following equation:

Answer 1

Answer:

B. beginning inventory cost of goods purchased – ending inventory

Explanation:

Cost of goods sold = Opening Inventory + Cost of goods purchased - Closing inventory

This is because Opening + Purchases = Total maximum level of inventory held during the year, out of which some will be sold and some will be kept as part of closing inventory.

Thus Total Opening + Purchases - Closing Inventory = Cost of goods sold

Therefore correct option is, here it is clear that beginning inventory + cost of goods purchased is written, as in option A with same factors there is negative sign in front of cost of goods purchased.

B. beginning inventory cost of goods purchased – ending inventory