Question

On Sep 22, 2018 a flood destroyed the entire merchandise inventory on hand in a warehouse owned by the Rocklin Sporting Goods Company. The following info is available fro the records of company's periodic inv system. 2 ways to calculate CGS?

Answer 1

There are two ways to calculate the cost of goods sold (CGS) in a business: the periodic inventory system and the perpetual inventory system.

Step-by-step explanation:

To calculate the cost of goods sold (CGS) in a business, there are two common methods: the periodic inventory system and the perpetual inventory system.

1. Periodic Inventory System: This method involves taking a physical count of the inventory at the end of a period and subtracting it from the beginning inventory plus purchases made during the period to calculate the cost of goods sold.

2. Perpetual Inventory System: In this method, the cost of goods sold is calculated continuously throughout the year. It relies on recording every transaction that affects the inventory, such as purchases and sales, and adjusting the inventory in real-time.