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Relationship between Inventory and COGS: Beginning Inventory + Purchases = Goods Available for Sale. Goods...

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Accounting

Relationship between Inventory and COGS:

Beginning Inventory + Purchases = Goods Available for Sale.

Goods Available for Sale = COGS + Ending Inventory

1. Which method yields higher net income? (Hint: Higher Ending Inventory means lower COGS. Lower COGS (COGS is an expense account) = Higher Net Income)

2. Which method would a business choose under the income statement approach?

3. Which method would a business choose under the Balance Sheet approach?

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