WAXS-D, merchandisers of musical instruments, has provided the following details: Credit terms are: 3/20, n/45, FOB shipping. Calculate the net cost of inventory purchased assuming that there are no other inventory related transactions during the month.
A)$785,000
B)$740,000
C)$725,000
D)$743,250

Question

WAXS-D, merchandisers of musical instruments, has provided the following details:  Credit terms are: 3/20, n/45, FOB shipping. Calculate the net cost of inventory purchased assuming that there are no other inventory related transactions during the month.
A)$785,000 
B)$740,000 
C)$725,000 
D)$743,250

Quizplus · Accepted Answer

To calculate net cost of inventory purchased, we need to first find the gross cost of inventory by dividing the total amount by (1-3%). Then, we need to add the shipping cost, which is not included in the credit terms.

Gross cost of inventory = $11,824.16 / 0.97 = $12,193.98

Shipping cost would depend on the destination, but let's assume it is $1,056.52.

Net cost of inventory = Gross cost + Shipping cost - Discount

We know that the discount is 3% of the gross cost, so:

Discount = 0.03 x $12,193.98 = $365.82

Therefore,

Net cost of inventory = $12,193.98 + $1,056.52 - $365.82 = $11,884.68

This corresponds to answer choice D.

WAXS-D, Merchandisers of Musical Instruments, Has Provided the Following Details