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26 July, 14:43

Cost of goods sold is computed from the following equation:

A. beginning inventory - cost of goods purchased ending inventory.

B. beginning inventory cost of goods purchased - ending inventory.

C. sales - cost of goods purchased beginning inventory - ending inventory.

D. sales gross profit - ending inventory beginning inventory.

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  1. 26 July, 18:04
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    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
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