Which expression represents purchases in terms of COGS and inventory?

Which expression represents purchases in terms of COGS and inventory?

• A. Purchases = COGS
• B. Purchases = Inventory - COGS
• C. Purchases = COGS - Inventory
• D. Purchases = COGS + Inventory

Answer: (D)

The key idea is how purchases relate to COGS and inventory in a periodic inventory setup. COGS is the amount that comes from the goods you had to sell during the period, which depends on what you started with, what you bought, and what you ended with. The fundamental relation is: COGS = Opening inventory + Purchases − Ending inventory. If you rearrange this to solve for Purchases, you get: Purchases = COGS + Ending inventory − Opening inventory. In many exam contexts, the term “Inventory” in the question is used to mean Ending inventory, and the Opening inventory is assumed to be zero (or not treated separately for the period). Under that assumption, Purchases simplify to: Purchases = COGS + Inventory. That matches the given answer. The other forms would misstate the balance by omitting the ending inventory, or by subtracting it in the wrong direction.

The key idea is how purchases relate to COGS and inventory in a periodic inventory setup. COGS is the amount that comes from the goods you had to sell during the period, which depends on what you started with, what you bought, and what you ended with. The fundamental relation is:

COGS = Opening inventory + Purchases − Ending inventory.

If you rearrange this to solve for Purchases, you get:

Purchases = COGS + Ending inventory − Opening inventory.

In many exam contexts, the term “Inventory” in the question is used to mean Ending inventory, and the Opening inventory is assumed to be zero (or not treated separately for the period). Under that assumption, Purchases simplify to:

Purchases = COGS + Inventory.

That matches the given answer. The other forms would misstate the balance by omitting the ending inventory, or by subtracting it in the wrong direction.