Which statement best depicts the inventory cost flow equation?
A)Cost of goods available for sale = Beginning inventory + Ending inventory.
B)Beginning inventory + Purchases = Cost of sales + Ending inventory.
C)Sales - Cost of goods sold = Gross margin.
D)Gross margin - Operating expenses = Operating income.

Question

Quizplus · Accepted Answer

The inventory cost flow equation is used to calculate the cost of goods sold and the cost of ending inventory. It is expressed as: Beginning inventory + Purchases = Cost of goods available for sale. This equation can be rearranged to solve for either the cost of goods sold or the cost of ending inventory: Cost of goods available for sale - Ending inventory = Cost of goods sold. Alternatively, Beginning inventory + Purchases - Cost of goods sold = Ending inventory.

Which Statement Best Depicts the Inventory Cost Flow Equation