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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Describe the relationship between cost of goods sold and inventory.

To determine

Explain the relationship between inventory and cost of goods sold.

Explanation

Cost of goods sold: Cost of goods sold is the total of all the expenses incurred by a company to sell the goods during the given period.

The relationship between inventory and cost of goods sold can be explained by the cost of goods sold model:

For a merchandiser:

[Beginning inventory]+[Net purchases]=[Cost of goods available for sale][Ending inventory]=Cost of goods sold

For a manufacturer:

[

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