Question

Hasham purchases inventory from overseas and incurs the following costs: the merchandise cost is $80,000, credit terms 1/10, n/30, applicable only to the $80,000; FOB shipping point freight charges are $2,500; insurance during transit is $300; and import duties are $1,500. Hasham paid within the discount period. Compute the cost that should be assigned to the inventory.

Answer 1

Answer:

The cost that should be assigned to the inventory is $83,500

Explanation:

Inventory cost includes all those costs which is related to the inventory.

The computation of cost is shown below:

= Merchandised cost - discount + freight charges + insurance charges + import duties

where,

discount is given at 1 % of merchandise cost since hasham has paid within the discount period.  So, discount will be $80,000 × 1% = $800

Now apply the above formula for computation:

= $80,000 - $800 +$2,500 + $300+ $1,500

= $83,500

Thus, we add all the inventory expenses and deduct discount expense because he had paid the amount within discount period.

Hence, the cost that should be assigned to the inventory is $83,500