Touch Tronix, Inc.sells component parts to Advanced Communications, Inc.a cell phone manufacturer.On December 10, 2011, Touch Tronix, Inc.sold €680,000 of goods to Advanced Communications, Inc.on account for €880,000.Terms of the sale were 2/10, net 30.Advanced Communications, Inc.paid €13,000 in freight charges.On December 13, 2011, Advanced Communications, Inc.returned 5% of the goods due to inferior quality.On December 18, 2011, 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?

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Quizplus · Accepted Answer

The ending inventory balance is calculated as follows: Initial purchase of €680,000 minus 5% returns (€34,000) equals €646,000. The discount for early payment is 2% of €646,000, which is €12,920. Therefore, the ending inventory balance is €646,000 - €12,920 = €633,080. Adding the freight charges of €13,000 results in a final inventory balance of €646,080.