11 of 20 (2 complete) v WAXS-D, merchandisers of musical instruments, has provid
ID: 2403150 • Letter: 1
Question
11 of 20 (2 complete) v WAXS-D, merchandisers of musical instruments, has provided the following details: Mar 5 Inventory purchased on account Mar. 8 Freight in Mar 13 Purchase returns Mar 14 Alowances by vendor Mar. 20 Payment made to vendor for purchases on March 5 $800,000 40,000 60,000 5,000 Credit terms are 4/20, n/45, F0B shipping point. Calculate the net cost of inventory purchased assuming that there are no other inventory -related transactions during the month. OA ST36,000 OB. $725,000 O C. $734,400 O D. $785,000Explanation / Answer
Answer
A
Inventory purchased
$ 800,000.00
B
Purchase returns
$ 60,000.00
C
Allowance by vendor
$ 15,000.00
D=A - B - C
Accounts payable due
$ 725,000.00
E
Discount rate
4%
F = D x E
Purchase discount
$ 29,000.00
G = E - F
Payment made within discount term of 20 days
$ 696,000.00
A [calculated above]
Payment made within discount term of 20 days
$ 696,000.00
B [given]
Freight In
$ 40,000.00
C = A + B
Net Cost of Inventory
$ 736,000.00
Hence, correct answer is Option ‘A’ $ 736,000
A
Inventory purchased
$ 800,000.00
B
Purchase returns
$ 60,000.00
C
Allowance by vendor
$ 15,000.00
D=A - B - C
Accounts payable due
$ 725,000.00
E
Discount rate
4%
F = D x E
Purchase discount
$ 29,000.00
G = E - F
Payment made within discount term of 20 days
$ 696,000.00
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