On September 1, Horton purchased $13,300 of inventory items on credit with the terms 1/15, net 30, FOB destination. Freight charges were $280. Payment for the purchase was made on September 18. Assuming Horton uses the perpetual inventory system and the net method of accounting for purchase discounts, what amount is recorded as inventory from this purchase?

Question

Quizplus · Accepted Answer

Under the net method, the purchase discount is assumed to be taken. The discount is 1% of $13,300, which is $133. Therefore, the inventory is recorded at $13,300 - $133 = $13,167. Freight charges are not included in the inventory cost under FOB destination terms.

On September 1, Horton Purchased $13,300 of Inventory Items on Credit