To illustrate, assume this bicycle is ordered by Rider Inc. The precise moment for recording the transaction is probably not critical except near the end of the year when the timing of journal entries can impact the balances to be included on the financial statements. Delivery takes several days at a minimum. When should an inventory purchase be recorded? Assume, for example, that Builder Company (the manufacturer of this bicycle) is located in Wisconsin, whereas the retail store operated by Rider is in Kentucky. (the sporting goods company) buys a bicycle for resell purposes and records the transaction using either a perpetual or periodic system. Understand the necessity of taking a physical inventory count.Provide the computation used in a periodic inventory system to derive cost of goods sold along with the adjusting entry necessary to enter the appropriate balances into the accounting system for each period.

Identify the time at which cost of goods sold is computed in a periodic inventory system as well as the recording made at the time of sale.

Identify the time at which cost of goods sold is computed in a perpetual inventory system as well as the recording made at the time of sale.

Explain the meaning of the FOB point in connection with an inventory purchase and its impact on the recording of the transaction.

At the end of this section, students should be able to meet the following objectives:

Cogs formula accounting