Question

Northwest Fur Co. started 2013 with $94,000 of merchandise inventory on hand. During 2013, $400,000 in merchandise was purchased on account with credit terms of 1/15, n/45. All discounts were taken. Purchases were all made f.o.b. shipping point. Northwest paid freight 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. Northwest uses a perpetual inventory system. What is ending inventory assuming Northwest uses the gross method to record purchases?
A) $112,490.
B) $112,550.
C) $116,500.
D) $120,300.

Answer 1

Answer: C $116,500

Explanation:Northwest ending inventory is calculated thus:

Opening Inventory                        $94,000

Purchases                                       $400,000

Freight Charges                             $7,500

Good Returned                               ($5,000)

Goods Sold                                      ($380,000)

Closing Inventory                            $116,500