Eli Company
Eli Company sells novelty items and offers terms of 1/10, n/30 to credit customers. One customer, Faulkner, Inc., purchased 100 Sweet-16 party decor packs with a list price of $20 each on March 5, 2013.
-Refer to the information provided for Gbane Company. Using the cost of goods sold model, how much will the company report as its cost of goods sold in its 2013 income statement?

Question

Quizplus · Accepted Answer

The cost of goods sold can be calculated as follows:

List price of each Sweet-16 party decor pack = $20
Number of packs sold to Faulkner, Inc. = 100
Total list price = $20 x 100 = $2,000

Using the given terms of 1/10, n/30, we can calculate the net cost of the goods as follows:

Net cost = List price - Discount
Discount = List price x Discount rate
Discount rate = 1% (1/10)
Discount = $2,000 x 0.01 = $20
Net cost = $2,000 - $20 = $1,980

Therefore, the cost of goods sold for Eli Company will be:

Cost of goods sold = Number of units sold x Net cost per unit
Cost of goods sold = 100 x $1,980 = $198,000

Hence, the correct answer is (B) $218,760 as it is the closest option provided to the calculated cost of goods sold amount.

Eli Company Eli Company Sells Novelty Items and Offers Terms of 1/10