Northwest Fur Co.started the year with $94,000 of merchandise inventory on hand.During the year,$400,000 in merchandise was purchased on account with credit terms of 1/15,n/45.All discounts were taken.Northwest paid freight-in charges of $7,500.Merchandise with an invoice amount of $5,000 was returned for credit.Cost of goods sold for the year was $380,000.What is ending inventory?

Question

Quizplus · Accepted Answer

Starting inventory = $94,000
Purchases on account = $400,000

Less: Purchase discounts = $400,000 x 1% = $4,000

Net Purchases = $400,000 - $4,000 = $396,000

Add: Freight-in = $7,500

Total cost of merchandise available for sale = $497,500

Cost of goods sold = $380,000

Ending inventory = Total cost of merchandise available for sale - Cost of goods sold

Ending inventory = $497,500 - $380,000 = $117,500

Less: Return = $5,000

Ending inventory after return = $112,500

Therefore, the answer is B) $112,550.