Question

Foxtrot Co. started 2021 with $113,000 of merchandise inventory on hand. During 2021, $480,000 in merchandise was purchased on account with credit terms of 2/15, n/45. All discounts were taken. Purchases were all made f.o.b. shipping point. Foxtrot paid freight charges of $7,900. Merchandise with an invoice amount of $3,600 was returned for credit. Cost of goods sold for the year was $376,000. Foxtrot uses a perpetual inventory system.
What is ending inventory assuming Foxtrot uses the gross method to record purchases?

a. $188,200.
b. $192,600.
c. $179,088.
d. $179,028.

Answer 1

Answer:

$211,772

Explanation:

The computation of ending inventory is shown below:-

Discount = ($480,000 - $3,600) × 2%

= $9,528

Cost of goods for sale = Beginning inventory + purchases - returns at invoice price - Discounts + Freight - Cost of goods sold

= $113,000 + $480,000 - $3,600 - $9,528 + $7,900

= $587,772

Ending inventory = Cost of goods for sale - Cost of goods sold

= $587,772 - $376,000

= $211,772

So, the right answer is $211,772. Hence the option is not available.