Inventory (beginning balance remains unadjusted during the period): 3 units at $260 each or $780
Purchases (total inventory costs incurred during the period; for this example, the balance here includes the invoice price, sales discount, transportation-in, assembly, and the like although they would have been recorded separately):
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General Ledger Balances—Periodic Inventory System
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5 units at $260 each or $1,300
Based on this information, total inventory available for to be sold by Rider Inc. during this period is eight units
costing $2,080 ($780 plus $1,300).
When using a periodic system, cost of goods sold is computed as a prerequisite to preparing financial statements.
Inventory on hand is counted (a process known as a “physical inventory”) and all units that are no longer present
are assumed to have been sold. The amount of missing inventory is determined in this process. The figure is then
reported as the company’s cost of goods sold for the period. Because complete inventory records are not available,
any units that are lost, stolen, or broken cannot be separately derived. All merchandise that is no longer on hand
is included within cost of goods sold.