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 the net cost of inventory purchased, we need to first determine the gross cost of inventory purchased:

Gross cost = Cost of goods + Freight charges

The credit terms state that the FOB shipping (Free on Board) – which means the buyer is responsible for shipping costs. Therefore, we don't need to consider any additional shipping charges.

Cost of goods = $300,600
Discount rate = 3%
Discount amount = 0.03 x $300,600 = $9,018
Net cost of goods = Cost of goods – Discount amount = $300,600 - $9,018 = $291,582

Therefore, the gross cost of inventory purchased is $291,582.

The net cost of inventory purchased is the gross cost minus any discounts taken, so:

Net cost = Gross cost – Discount amount = $291,582 - $9,018 = $282,564

Therefore, the correct answer is D) $743,250.

WAXS-D,merchandisers of Musical Instruments,has Provided the Following Details: Credit