Question

Northwest Fur Co. started 2021 with $95,000 of merchandise inventory on hand. During 2021, $440,000 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 $3,800 was returned for credit. Cost of goods sold for the year was $365,000. Northwest uses a perpetual inventory system.
Assuming Northwest uses the gross method to record purchases, what is the cost of goods available for sale?
A. $540,300.
B. $527,214.
C. $539,100.
D. $527,100.

Answer 1

Answer:

B. $527,214

Explanation:

Calculation to determine the cost of goods available for sale

Beginning inventory $95,000

Add Inventory purchased $440,000

Add Freight charges $9,100

Less Merchandise returned ($3,800)

Less Discounts ($13,086)

[($440,000 – 3800) x 3%)]

Cost of goods available for sale $527,214

Therefore Cost of goods available for sale is $527,214