Question

Landry Co. purchased $15,000 in inventory on April 1 under terms of 1/10, net 30. Landry missed the prompt payment deadline and still holds all the inventory. Under the gross method and the net method, at what amount is the inventory carried on Landry’s balance sheet?

Answer 1

Answer:

Under the gross method

= $15,000

Under the net method

= $14,850

Explanation:

Data provided in the question:

Amount of inventory purchased = $15,000

terms of 1/10, net 30

Now,

Under the gross method,

The inventory is recorded at the price mentioned on invoice and only discounts taken are recognized

therefore,

Amount carried by inventory = Amount of inventory purchased

= $15,000

and,

Under the net method all the discounts will be taken

therefore,

Amount carried by inventory

= Amount of inventory purchased - Discount

= $15,000 - 1% of $15,000

= $15,000 - $150

= $14,850