A company purchased inventory for $2,000 from a vendor on account, FOB shipping point, with terms of 2/10, n/30. The company paid the shipper $100 cash for freight in. The company then returned damaged goods worth $200. The invoice has been paid 8 days after the sale. Assuming that there was no beginning inventory balance, the cost of inventory would be: (Assume a perpetual inventory system)
A)$1,764.
B)$1,864.
C)$2,100.
D)$1,900.

Question

Quizplus · Accepted Answer

The cost of inventory is calculated as follows: $2,000 (purchase) - $200 (returns) = $1,800. A 2% discount is applied because the invoice was paid within 10 days: $1,800 x 2% = $36. Therefore, $1,800 - $36 = $1,764. Adding the freight cost of $100, the total cost of inventory is $1,764 + $100 = $1,864.

A Company Purchased Inventory for $2,000 from a Vendor on Account