Fred's Footwear started with $7,000 in Inventory and had the following transaction totals for the month of April:
Sales $20,000
Sales Returns and Allowances 2,000
Cost of Goods Sold 8,000
Purchases 14,000
Freight 1,000
Purchases Returns and Allow. 2,000
Purchases Discounts ???
If ending Inventory for the period is $11,000, what is the total of purchase discounts experienced?
A) $3,000
B) $4,000
C) $2,000
D) $1,000

Question

Quizplus · Accepted Answer

To find the purchase discounts, we first calculate the cost of goods available for sale, then subtract the ending inventory and the cost of goods sold (COGS) to find the total purchase discounts. Starting inventory ($7,000) + Purchases ($14,000) + Freight ($1,000) - Purchases Returns and Allowances ($2,000) = $20,000 as the cost of goods available for sale. Ending inventory is $11,000, and COGS is $8,000, so $20,000 - $11,000 - $8,000 = $1,000 in purchase discounts.

Fred's Footwear Started with $7,000 in Inventory and Had the Following