Exhibit 7-1
Edwards Co. purchased raw materials with a cost of $95,000 on March 2, 2015. Credit terms of 3/20, n/60 applied. Edwards paid for the purchase on March 18, 2015. Calculate the amount at which Edwards would record the inventory on March 2, 2015, the date of purchase, using the method given.
-Refer to Exhibit 7-1. Edwards uses a perpetual inventory system and the net price method.
A) $42,000
B) $76,000
C) $92,150
D) $95,000

Question

Quizplus · Accepted Answer

Under the net price method, the purchase is recorded at the net of any purchase discounts available, regardless of whether the discount is actually taken. The discount available is 3% of $95,000, which is $2,850. Therefore, the inventory is recorded at $95,000 - $2,850 = $92,150 on March 2, 2015.

Exhibit 7-1 Edwards Co. Purchased Raw Materials with a Cost of $95,000