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In the periodic inventory system, how is cost of merchandise sold determined at period end?
ABy recording cost on each individual sale as it happens
BBy counting ending inventory after a running tally
CFrom cost of goods available for sale less ending inventory
DFrom beginning inventory less purchases for the period
Answer & Solution
Correct answer: C. From cost of goods available for sale less ending inventory
1. The periodic system does not keep a running balance during the period.
2. Cost of goods available for sale = beginning inventory + purchases.
3. A physical count gives ending inventory, which is subtracted to get cost of merchandise sold.
4. Rule out option D: purchases are added to beginning inventory, not subtracted.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §4.1.2 "Periodic Inventory System", p.119_
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