Which calculation correctly determines cost of goods sold for a period?

• A. Beginning Inventory + Ending Inventory - Purchases
• B. Beginning Inventory + Purchases - Ending Inventory
• C. Purchases - Ending Inventory
• D. Beginning Inventory - Ending Inventory + Purchases

Answer: (D)

The main idea is that cost of goods sold (COGS) for a period equals what was available for sale minus what’s left unsold at the end. What’s available for sale comes from starting stock (beginning inventory) plus what you purchased. So COGS = Beginning Inventory + Purchases − Ending Inventory. This expresses that you take the total goods you could have sold during the period and subtract the remaining inventory to find what was actually sold. Since addition and subtraction can be rearranged, this can also be written as Beginning Inventory − Ending Inventory + Purchases—the same value, just another order of the terms. The key point is subtracting ending inventory from the goods available for sale to get COGS.