A company purchased inventory for $2000 from a vendor on credit,FOB shipping point,with terms of2/10,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)$1864.
B)$1900.
C)$1960.
D)$1764.

Question

Quizplus · Accepted Answer

The cost of inventory is the invoice price plus freight in minus the cost of damaged goods returned. The invoice price is $2000, the freight in is $100, and the cost of damaged goods returned is $200. Therefore, the cost of inventory is $2000 + $100 - $200 = $1900. Since the invoice was paid within 10 days, the company is eligible for a 2% discount. The discount is calculated as 2% of $1900, which is $38. Therefore, the net cost of inventory is $1900 - $38 = $1862.

A Company Purchased Inventory for $2000 from a Vendor on Credit,FOB