Answer:
B) $639,600.
Explanation:
when you use the gross method to record purchases, the journal entries should be as follows:
Dr Merchandise inventory 540,000
Cr Accounts payable 540,000
Dr Merchandise inventory 8,800 (freight charges)
Cr Cash 8,800
Dr Accounts payable 3,100 (returned merchandise)
Cr Merchandise inventory 3,100
Dr Accounts payable 536,900
Cr Cash 520,793
Cr Merchandise inventory 16,107
Merchandise inventory = initial balance + purchase + freight charges - returns - purchase discounts = $110,000 + $540,000 + $8,800 - $3,100 - 16,107 = $639,593 ≈ $639,600 (it's the closest option).
