Hasham purchases inventory from overseas and incurs the following costs: the merchandise cost is $80,000,credit terms 1/10,n/30,applicable only to the $80,000;FOB shipping point freight charges are $2,500;insurance during transit is $300;and import duties are $1,500.Hasham paid within the discount period.Compute the cost that should be assigned to the inventory.
A)$83,500
B)$79,200
C)$81,700
D)$84,300
E)$81,000

Question

Quizplus · Accepted Answer

The cost of the inventory is the sum of the merchandise cost, freight charges, insurance during transit, and import duties. The merchandise cost is $80,000, the freight charges are $2,500, the insurance during transit is $300, and the import duties are $1,500. Therefore, the cost of the inventory is $80,000 + $2,500 + $300 + $1,500 = $84,300. However, Hasham paid within the discount period, so the cost of the inventory is reduced by 1% to $84,300 - 1% x $84,300 = $83,500.

Hasham Purchases Inventory from Overseas and Incurs the Following Costs