Question

Northwest Fur Co. started 2021 with $105,000 of merchandise inventory on hand. During 2021, $480,000 in merchandise was purchased on account with credit terms of 3/15, n/45. All discounts were taken. Purchases were all made f.o.b. shipping point. Northwest paid freight charges of $9,100. Merchandise with an invoice amount of $3,200 was returned for credit. Cost of goods sold for the year was $366,000. Northwest uses a perpetual inventory system.
What is ending inventory assuming Northwest uses the gross method to record purchases?

Answer 1

Answer:

$210,596

Explanation:

Northwest Fur Co.

Beginning inventory $105,000

Inventory purchase $480,000

Freight $9,100

Merchandise return ($3,200)

Discounts [(480,000-3,200)×3%] ($14,304)

Cost of goods available for sale $576,596

Cost of goods sold ($366,000)

Ending inventory $210,596

Therefore the ending inventory assuming Northwest uses the gross method to record purchases is $210,596

Answer 2

Answer: $210,596

Explanation:

GIVEN the following ;

Beginning inventory = $105,000

Inventory Purchased = $480,000

Discount = 3% = 0.03

Freight charge = $9,100

Returned merchandise = $3,200 Cost of goods sold = $366,000

Calculate the ending inventory :

Discount = $(480,000 - 3200) × 0.03

Discount = $14,304

Cost of goods sold = (Beginning inventory + inventory purchased + Freight - ending inventory) - (returned merchandise + discount)

$366,000 = $(105,000 + 480,000 + 9,100 - ending inventory) - $( 3,200 + 14,304)

$366,000 = $594,100 - ending inventory - $17,504

$366,000 = $576,796 - ending inventory

Ending inventory = $(576,596 - 366,000) = $210,596

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