Which option represents the formula for calculating cost of goods sold as Beginning Inventory plus Purchases minus Ending Inventory?

• A. Gross Profit
• B. Beginning Inventory + Purchases - Ending Inventory
• C. Ending Inventory
• D. Cost of Goods Sold

Answer: (B)

The main idea is how to determine what was actually sold during a period by tracking inventory flow. You start with the Beginning Inventory, add all Purchases made during the period, and then subtract the Ending Inventory. This yields the Cost of Goods Sold, the amount of inventory that was sold. For example, if you begin with 3,000 in inventory, add 5,000 in purchases, and have 1,800 left at the end, COGS = 3,000 + 5,000 − 1,800 = 6,200. This makes sense because you’re accounting for what was on hand plus what you acquired, minus what remains unsold to reveal what was sold. The other options don’t fit because Gross Profit is Sales minus COGS, not a formula for COGS; Ending Inventory is just the remaining stock value, not a complete calculation; and Cost of Goods Sold is the result, not the formula itself.