Question

Northwest Fur Co. started the year with $94,000 of merchandise inventory on hand. During the year, $400,000 in merchandise was purchased on account with credit terms of 1/15, n/45. All discounts were taken. Northwest paid freight-in charges of $7,500. Merchandise with an invoice amount of $5,000 was returned for credit. Cost of goods sold for the year was $380,000. What is ending inventory? a. $112490. b. $112,550. c. $116,500. d. $120,300.

Answer 1

Answer:

The answer is:

b. $112,550

Explanation:

Please find the below for detailed explanations and calculations:

- Beginning Inventory as given at: $94,000;

- Inventory purchased during the year = Net purchase during the year -Discount made on net purchase + Freight-in charges = (400,000 -5,000) - [ (400,000 -5,000) x 1%) + 7,500 = $398,550; ( as $5,000 purchase is returned on the initial purchase of $400,000 and 1% discount is only made on the net purchase of $395,000 ( $400,000 - $5,000) ).

- Cost of good sold during the year as given at: $380,000;

=> Ending inventory = Beginning inventory + Inventory purchased during the year - Cost of good sold during the year = 94,000 + 398,550 - 380,000 = $112,550.