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Let's think of the following situation during the period. In addition to the beginning inventory, a company purchased additional merchandise so the amount of goods available for sale became the beginning inventory plus additional purchased merchandise. At the end of the period, the company wants to determine the amount of the cost of goods sold and ending inventory. How do they determine the amount of the cost of goods sold and ending inventory? There are two types of approaches: periodic inventory method and perpetual inventory method. The periodic inventory method is the following.
(Cost of goods sold) = (Goods available for sales) ? (Ending inventory)
In the periodic inventory method, we determine the amount of ending inventory at the end of period, and then subtract the ending inventory from the goods available for sale...
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