Exhibit 8-1 Walters Co.purchased raw materials with a catalog price of $70, 000 on March 2, 2010.Credit terms of 4/20, n/60 applied.If Walters pays for the purchase on March 18, 2010, calculate what amount is recorded for inventory on March 2, 2010, using the method given.
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Refer to Exhibit 8-1.Walters uses a perpetual inventory system and the gross price method.
A)$42, 000
B)$56, 000
C)$67, 200
D)$70, 000

Question

Quizplus · Accepted Answer

Under the gross price method in a perpetual inventory system, the inventory is recorded at the gross price of $70,000 regardless of any cash discounts for early payment. The discount, if taken, is recorded as a reduction in the cost of inventory or as a purchase discount at the time of payment, not at the time of purchase.