Touch Tronix, Inc. sells component parts to Advanced Communications, Inc. a cell phone manufacturer. On December 10, 2014, Touch Tronix, Inc. sold €1,020,000 of goods to Advanced Communications, Inc. on account for €1,320,000. Terms of the sale were 2/10, net 30. Advanced Communications, Inc. paid €19,500 in freight charges. On December 13, 2014, Advanced Communications, Inc. returned 5% of the goods due to inferior quality. On December 18, 2014, Advanced Communications, Inc. paid the account in full. Advanced Communications, Inc. uses a perpetual inventory system. If Advanced Communications, Inc. has not yet sold any of these goods, what is the ending balance in the inventory account after the payment is made?

Question

Quizplus · Accepted Answer

The ending inventory balance is calculated as follows: Initial purchase of €1,320,000 - 5% return (€66,000) = €1,254,000. Then, apply the 2% discount on the remaining balance: €1,254,000 * 2% = €25,080. Therefore, the ending inventory balance is €1,254,000 - €25,080 = €1,228,920. Adding the freight charges of €19,500 gives a total of €1,248,420.