A company purchased inventory for $71,000 from a vendor on account,FOB shipping point,with terms of 3/10,n/30.The company paid the shipper $1,700 cash for freight in.The company paid the vendor nine days after the invoice date.If there was no beginning inventory,the cost of inventory would be ________.(Assume a perpetual inventory system.)
A) $70,570
B) $72,700
C) $67,170
D) $69,300

Question

Quizplus · Accepted Answer

The cost of inventory can be calculated as follows:

Cost of Inventory = Cost of goods + Freight in

Cost of goods = $71,000 (given)

Freight in = $1,700 (given)

The vendor terms are 3/10, n/30 which means that the company can get a 3% discount if they pay within 10 days. Since the company paid within 9 days, they are eligible for the discount.

Discount = 0.03 x $71,000 = $2,130

Net cost of goods = $71,000 - $2,130 = $68,870

Cost of inventory = $68,870 + $1,700 = $70,570

Therefore, the answer is A) $70,570.

A Company Purchased Inventory for $71,000 from a Vendor on Account,FOB