Consider the following facts: - Company A purchased goods for $20,000. - Its cre

Question

Consider the following facts:

- Company A purchased goods for $20,000.

- Its credit terms were 2/10, n/30.

- Company A returned $400 of the goods to the seller and received credit on its account.

- Company A paid the freight on the shipment of the goods originally. The freight cost was $100.

- Company A made final payment for the goods within the discount period.

Based on this scenario, Company A's inventory:

a. increased by $19,308.

b. increased by $19,208.

c. increased by $19,700.

d. increased by $19,306.

e. None of these answers are correct.

Explanation / Answer

d. increased by $19,306. Total Purchases              20,000.00 Freight                    100.00 Total Purchases Cost              20,100.00 Goods returned Cost                      400.00 Purchases Cost before discount              19,700.00 Discount = 19,700*2%                    394.00 Net purchase Cost              19,306.00

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