Question

Which step must happen first when determining cost of goods sold using a periodic inventory system?

1) compute the dollar value of the ending inventory balance
2) count the number of units on hand
3) compute and record cost of goods sold

Answer 1

The first step when determining cost of goods sold using a periodic inventory system is to count the number of units on hand. Then, the dollar value of the ending inventory balance can be computed. Finally, the cost of goods sold is computed and recorded.

Step-by-step explanation:

The step that must happen first when determining cost of goods sold using a periodic inventory system is to count the number of units on hand. This step involves physically counting the inventory to determine the quantity of each item. By knowing the number of units on hand, we can calculate the cost of goods sold accurately.

Once we have the count of units on hand, we can then proceed to compute the dollar value of the ending inventory balance. This involves multiplying the number of units on hand by their respective costs.

Finally, we compute and record the cost of goods sold. This is done by subtracting the value of the ending inventory from the total cost of goods available for sale.